Home > News > NatWest reports £1.1bn profit as predicts 7% fall in house prices

NatWest reports £1.1bn profit as predicts 7% fall in house prices

Pre-tax profits at NatWest Group remained flat between July and September at £1.1bn, amid a worsening economic outlook and a cost of a living squeeze on its customers, as the bank predicted UK house prices would fall by 7% next year.

Its profits, boosted by higher interest rates increasing its margin between what it charged for loans and paid out to savers, were slightly higher than the £1bn made in the same period a year earlier but lower than analysts’ forecasts.

The lender, which is still 48% owned by the government, also took a £242m provision for potential defaults in the three months to 30 September, which it said reflected increased economic uncertainty, and mirrored the amount released by the bank a year earlier.

Shares in NatWest tumbled by as much as 8% during morning trading on Friday, making it the biggest faller on London’s FTSE 100, on its higher loan loss provisions and lower-than-expected profits.

NatWest said defaults remained low but expected them to increase over the next year. It said it was not yet seeing signs of heightened financial distress among its customers but added that some had already changed their behaviour to manage their spending, including changing the supermarket they shop at or by consolidating their debts.

“The cost of living is clearly squeezing disposable income; we are seeing for the lowest decile income households that more of their disposable income is being spent on food and utilities,” said NatWest’s chief executive, Alison Rose.

Rose said that spending on travel and hospitality has continued, as seen in NatWest’s debit and credit card data, while many customers have a financial “buffer” after the coronavirus pandemic.

However, many are already “proactively managing their finances and their balance sheets” amid higher inflation and higher cost of living and preparing for an economic downturn.

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