NatWest third quarter earnings miss analyst forecasts amid warnings over its net interest margin for the full year.

The NatWest share price dips 12% on release of the earnings, its biggest one day fall since the Brexit referendum. Year to date, the NatWest share price is down by 30%.

Meantime, the consumer press is fixated over a separate report released by NatWest relating to controversial former politician Nigel Farage.

The bank admits to ‘serious failings’ into its handling of Farage’s account closure.

NatWest Q32023 total income rises by 3% y-o-y. This primarily reflects the impact of volume growth and favourable yield curve movements. For the year to date, total income rises by 17% to £10.9bn.

On the other hand, the net interest margin dips by 19 basis points from the prior quarter to 2.94%. For the full fiscal, NatWest now forecasts the NIM to be greater than 3%. This is based on lowered expectations for the mix of its deposit book. Specifically, customers are shifting balances from non-interest-bearing current accounts to interest bearing savings accounts, particularly term.

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By GlobalData

Term balances now account for 15% of deposits

Term balances now account for 15% of its deposits book, up from 11% at the end of the second quarter.

NatWest also flags up the continued impact on mortgage margins as the higher margin Covid-era book rolls off and is replaced at lower margins. Bank NIM is 3.11% for the year to date.

Chief Executive, Paul Thwaite, said: “Today’s Q3 2023 results show that NatWest is a strong bank which is performing well, generating sustainable profits and returns. This performance is built on the foundations of strong customer franchises and a robust balance sheet with high levels of liquidity and a well-diversified loan book. As a result, credit losses and impairments remain low and we are ready and able to stand by our customers and businesses through the current economic uncertainty.”

For the full fiscal, NatWest forecasts a cost:income ratio of below 52%. The bank continues to target a sustainable return on tangible equity for the group of 14-16% over the medium term.