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Highlights:
- NatWest shares are the best-performing among FTSE 100 banks this year.
- The lender expects full-year income to reach around £14 billion, following strong first-half performance.
- Investors will focus on impairments, margins, and loan growth in the upcoming third-quarter results.
As NatWest Group PLC (LSE:NWG) prepares to release its third-quarter results on Friday, October 25, it enters with a strong performance record, having outpaced its FTSE 100 banking peers this year. The lender raised its full-year income forecast earlier in the year after delivering better-than-expected results in the first half.
During its last earnings report, NatWest announced it expects full-year income to reach approximately £14 billion. This optimistic outlook followed first-half results where total income dropped less than anticipated, coming in at £7.1 billion, alongside an operating profit of £3 billion. The bank's resilience amidst challenging market conditions has made it a standout performer in the sector.
A key contributor to NatWest’s success has been its net interest margin (NIM), which rose by five basis points to 2.10% in the second quarter, largely driven by improved savings margins. The bank has projected its NIM to remain steady at 2.10% for the full year, reflecting robust performance across its core operations. Additionally, NatWest expects to achieve a return on tangible equity (ROTE) above 14%, while group operating costs, excluding litigation and conduct expenses, are projected to stay "broadly stable" compared to the previous year.
For the upcoming third-quarter results, analysts anticipate total income of £3.6 billion, a slight decline from the £3.7 billion reported in the second quarter. Pre-impairment profit is forecasted to remain relatively flat quarter-over-quarter at £1.63 billion, as NatWest continues to navigate the evolving economic landscape.
According to Matt Britzman, senior equity analyst at Hargreaves Lansdown, NatWest’s second-quarter performance provided strong momentum. "NatWest has plenty of wind in its sails after second-quarter results in July were a knockout," he remarked.
Looking ahead, key focus areas for investors will be impairments, margins, and loan growth. Britzman noted that with the Bank of England delivering its first interest rate cut in July, investors will closely watch how much of this reduction has been passed on to customers and whether it has triggered any shifts in saver behavior. Additionally, loan growth, particularly in the housing market, is expected to improve, providing a potential boost for mortgage growth. Markets will also be interested in whether corporate clients are increasing activity, given NatWest's larger exposure to business banking compared to its peers.
NatWest’s steady growth, disciplined cost management, and focus on core banking operations have positioned it well for a strong third-quarter performance, making it one of the most-watched banks in the upcoming earnings season.
