NatWest (NWG.L) reported a 25% increase in profits to ￡1.67bn ($2.16bn) in the three months to September and upgraded its outlook, buoyed by increased lending and a focus on operational efficiency.

The taxpayer-supported bank revised its income outlook to ￡14.4bn, up from ￡14bn, and increased its return on tangible equity target from 14% to 15%.

Operating profits surged to ￡1.6bn for the quarter, reflecting a 25.7% increase year-on-year and surpassing analyst predictions, which had anticipated profits of less than ￡1.5bn.

This was driven by net interest income — the difference what banks earns on loans and pays out on customer deposits and a key profit driver for retail banks — which came in at a better-than-expected ￡2.90bn.

Net income reached ￡1.2bn, significantly exceeding forecasts that estimated it would fall below ￡1bn. Other operating expenses declined by ￡144m compared to the second quarter.

Chief executive Paul Thwaite said: “The strength of NatWest Group’s performance is underpinned by the support we provide to our 19 million customers across the UK.

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“By continuing to deliver against our strategy, we are growing and simplifying our bank whilst managing our capital more efficiently.

“As the UK’s biggest bank for business, and one that serves millions of households, NatWest Group plays a key role in driving economic growth across the UK. Throughout the third quarter of 2024, we have grown our lending, helping customers to buy or remortgage their homes or to start and grow their businesses.

“With customer activity increasing, defaults remaining low and optimism amongst businesses and consumers, we are well placed to succeed with our customers and for our shareholders in the months and years ahead.”

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NatWest recorded a net impairment charge of ￡245m, equivalent to 25 basis points of gross customer loans, while defaults remained low across its loan portfolio. Net loans to customers, excluding central items, increased by ￡8.4bn, bolstered by a ￡2.3bn acquisition of Metro Bank’s (MTRO.L) mortgage portfolio, alongside strong performance in all three business segments.

Mortgage balances rose by ￡1.4bn during the quarter, and customer deposits, excluding central items, grew by ￡2.2bn, driven by savings across all business units.

The earnings report arrives as the bank progresses toward a complete exit from state ownership following its bailout during the 2008 financial crisis, with the government's stake now below 16% as of this month.

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