NatWest profit jumps as it upgrades 2025 guidance on loan growth

By Lawrence White

LONDON (Reuters) -NatWest reported a 30% rise in third-quarter profit on Friday and upgraded its performance target for 2025, as it grew loans and assets in its wealth business and avoided hefty charges for mis-selling car finance that hurt rivals.

The upgrade helped to send NatWest shares to their highest level since December 2008 during the depths of the global financial crisis, and reflected the transformation of the bank that returned to full private ownership in May.

The British lender reported pretax operating profit for the July to September period of 2.2 billion pounds ($2.95 billion), up from 1.7 billion a year earlier and above the 1.8 billion expected by analysts. 

It also said it expected to make a return on tangible equity this year of above 18%, from previous guidance of above 16.5%, as it reported broad-based loan growth across its mortgages and business lending that lifted overall income.

The bank's increased return on tangible equity guidance to the highest among British peers and one of the highest across Europe, showed the strength of NatWest's strong underlying business, as it emerged from the distraction of its state ownership and swerved the UK motor finance scandal.

Shares rose 4% in early trading, against a flat benchmark FTSE index.

NatWest's performance could also prompt it to seek more acquisitions, said Chris Beauchamp, chief market analyst for the UK at investment and trading platform IG.

"Given the confidence we have in the organic plan, any inorganic activity needs a high bar and needs to be compelling from a shareholder value perspective," CEO Paul Thwaite told reporters on a conference call when asked about the bank's potential to acquire in wealth management in particular.

The lender said its assets under management and administration grew by 8.1% to 56 billion pounds, driven mainly by positive movements in markets that lifted portfolio values.

NatWest's exposure to private credit, a source of concern for banks following the collapse of several firms funded by the opaque lending practice in the United States, was less than 5 billion pounds out of total group exposures of 420 billion, Thwaite also said.

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NatWest's robust performance showed its contrasting near-term fortunes versus rival Lloyds, which on Thursday reported its profit fell on charges related to Britain's motor finance mis-selling probe.

Natwest, which was formerly known as RBS, on May 30 announced its return to full private ownership, ending a costly, taxpayer-funded government investment that dated back to its rescue in the global financial crisis.

It has since transformed itself from a sprawling global investment bank into a domestic-focused lender.

Its strong performance could nonetheless be overshadowed in the coming weeks as British banks await a November budget from Finance Minister Rachel Reeves that some industry executives say could include a tax raid on banks to plug a hole in the public finances.

($1 = 0.7451 pounds)

(Reporting By Lawrence White; Editing by Tommy Reggiori Wilkes, Jan Harvey and Barbara Lewis)