NWG Natwest Group Plc

--NatWest unexpectedly reported a pretax profit of GBP355 million for the third quarter on lower-than-forecast impairments

--Full-year impairment charges are likely to be at the lower end of the GBP3.5 billion-GBP4.5 billion range

--The retail banking arm benefited from stronger debit and credit card spending

By Sabela Ojea

NatWest Group PLC on Friday reported an unexpected swing to profit for the third quarter of 2020 on lower-than-feared impairments.

The U.K. bank posted an operating pretax profit of 355 million pounds ($459 million) after booking GBP254 million in impairment losses. This compares with an operating pretax loss of GBP8 million for the same period a year earlier and a loss of GBP1.29 billion in the second quarter of the year.

NatWest was expected to report a pretax loss of GBP75 million for the third quarter of the year, and impairment losses of GBP628 million, according to the bank's own compilation of forecasts.

The FTSE-100 bank's total income declined to GBP2.42 billion from GBP2.90 billion in the year-earlier period. The lender said total income decreased due to lower fee income on overdrafts, lower deposit returns, mortgage margin dilution and lower international spend-related fee income, partially offset by strong balance growth in mortgages and customer deposits.

Nat West's Common Equity Tier 1 capital ratio --a measure of a bank's financial strength-- stood at 18.2% at the end of the quarter, up from 17.2% as at June 30. It was anticipated at 16.7%, according to the lender's compilation of forecasts.

Regarding its retail banking customer activity, NatWest said that debit and credit card spend levels improved 30% and 43% respectively, which mortgage applications increasing 91%.

The bank added that it maintains its outlook guidance for the whole year, but noted that impairment charges are now likely to be at the lower end of the GBP3.5 billion-GBP4.5 billion range following the limited level of defaults across lending portfolios in the third quarter.

Write to Sabela Ojea at sabela.ojea@wsj.com; @sabelaojeaguix

(END) Dow Jones Newswires

October 30, 2020 05:16 ET (09:16 GMT)

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