NatWest earnings soar 30% as it takes ‘tight control’ over business costs

NatWest Group has revealed its earnings soared by 30% in the third quarter after boosting its income and as it continues to focus on cutting business costs.

Shares were rising following the update, which marked a contrast to rival banks Lloyds and Barclays who have been affected by the car finance saga.

The banking group, which also includes Royal Bank of Scotland and Ulster Bank, reported a pre-tax operating profit of £2.2 billion for July to September.

This was a leap from the £1.7 billion made in the same period last year, and significantly ahead of the £1.8 billion expected by analysts.

Total income generated by the group jumped by 16% in the third quarter, compared with the previous year, while lending grew including for mortgages.

Chief executive Paul Thwaite said he was “very encouraged” with the mortgage market with demand for loans remaining “healthy” since April, when stamp duty relief became less generous.

At the same time, the bank brought down its expenses in previous months which helped lower its cost-to-income ratio. This means it is spending less on running the business as a percentage of the amount it generates in income.

NatWest said it has been focused on becoming a more efficient bank and simplifying its operations, which it hopes will save it money in the long run.

This included shedding about 600 jobs over the past year, 100 of which were in the last quarter.

Mr Thwaite said it reflected efforts to “reshape the workforce”, adding: “It’s about getting the right skills in the right place, so we continue to add roles in areas like tech, software engineering, AI, data and analytics” while reducing jobs such as “manual operations”.

NatWest’s latest earnings mark a contrast to Lloyds which revealed a 36% drop in its third quarter earnings, while Barclays also reported lower year-on-year profits.

The lenders have been affected by the UK regulator’s planned motor finance compensation scheme, with Lloyds being forced to set aside £1.95 billion for potential payouts.

Meanwhile, Mr Thwaite said he “recognised some of the difficult choices that the Government has” ahead of the autumn Budget next month, amid speculation that the Chancellor is considering raising taxes on banks.

But the NatWest boss signalled that a bank tax raid could be add odds with efforts to stimulate economic growth and attract investment to the UK.

“My view remains that strong economies need strong banks and I really want to use the capital of the bank to support our customers,” he said.

“I’ve been encouraged by what the Chancellor and the Government have said about how they see the role of financial services in helping support that growth agenda.

“The Government should be thoughtful about signals it sends to investors who are looking at the UK as a long term home for capital.”

“With our strategic focus on growth, NatWest Group’s impact can be felt right across the economy, as we help people get on the housing ladder, save and invest for the future and grow their businesses,” Mr Thwaite added.

“We are also becoming a much simpler bank, with tight control of costs supporting our digital transformation that is enabling us to anticipate and meet the changing needs of customers at pace.”