Since Lloyds kicked off the UK banking earnings season earlier this week, UK-focused FTSE 100 bank earnings have improved steadily. Today, NatWest took the crown in terms of share price reaction with a 4.8% jump.
Investors were delighted with NatWest’s 2.3% increase in income in Q3 compared to Q2 and an upbeat assessment of future earnings.
“NatWest marks the third major UK bank to report better than expected results this week, but this time it’s not driven by impairments. Better income and costs drove the beat today, offset by higher impairments than expected, which does buck the trend we saw from Lloyds and Barclays. That said, default levels remain low at NatWest and that bodes well for performance over the medium term,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
The results took NatWest shares to the highest levels since 2015.
NatWest wraps up earnings from the three FTSE 100 banks most heavily associated with the UK economy: NatWest, Lloyds, and Barclays. Going into the run of results, there were a number of potential risks, namely falling interest rates and softening economic growth. However, shareholders will be more than satisfied with better-than-expected earnings across the board and the absence of any signs of stress among their core customer base.
“It has been a pretty decent earnings season all-round for the UK banking sector and the positive trend continued with NatWest’s numbers,” said AJ Bell investment director Russ Mould.
“Better-than-expected income and lower-than-expected costs provided the cocktail for upgrades and investors have responded accordingly. The company, and its peer group, have been helped here by slower-than-anticipated rate cuts.”