RBS owner NatWest hit by profit margin warning amid changing customer habits: reaction

The group also said that its customers were dealing with cost-of-living pressures and soaring interest rates by moving their money to higher-interest savings accounts. It said 15 per cent of its customer deposits are now in fixed-term accounts which pay better interest rates, up from 8 per cent in the first quarter of the year.

Finance boss Katie Murray said the rate of movement from current accounts to savings accounts had slowed in September and October and that she expects around 17 per cent of deposits to sit in such accounts by the end of the year. That contributed to the group’s net interest margins dropping in the three months to the end of September, hitting around 2.94 per cent.

It downgraded its forecasted net interest margin (NIM) for the year from 3.2 per cent to 3.15 per cent. Some of the bank’s loans to customers which were made during the Covid era also had higher margins than the lower margin loans replacing them today, it said.

Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s not been a great year for the NatWest Group share price, and it got even worse this morning, the shares plunging to 30-month lows, after the bank lowered its full-year guidance on NIM, as well announcing that the FCA is reviewing the findings of an independent review into its conduct over the Nigel Farage debanking case.

“Given what has happened this week with Barclays and Lloyds and their NIM guidance, it wasn’t a surprise to see a further downgrade here, however that isn’t NatWest’s only problem given the fallout from CEO Alison Rose’s departure.”

On a more positive note, NatWest reported a profit of £1.33 billion for the latest quarter, up nearly 23 per cent from £1.09bn a year earlier. That result was only slightly shy of market expectations.

The group, which also owns Ulster Bank in Northern Ireland, said its income had increased, helped by increases in the amount of money it was lending and more income from its market division. The bank issued £7.5bn in new mortgages during the quarter, compared with £7.6bn in the previous three months and down from £11bn in the same period last year.

Richard Hunter, head of markets at investment firm Interactive Investor, noted: “The disappointing themes which have plagued bank results this week have unsurprisingly been echoed at NatWest, although perhaps to a lesser extent. Net interest margin declines across the sector have taken a toll on share price performance, while also suggesting that the benefits of higher interest rates have peaked as customers seek higher returns on their cash after years of virtually nil return. Despite the growth disappointments of the season so far, the strength of balance sheets across the sector remains healthily robust, and NatWest is no exception,” he added.

NatWest shares were down about 11 per cent in afternoon trading on Friday.

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