(Updates throughout)
By Iain Withers and Lawrence White
LONDON, April 28 (Reuters) - British bank NatWest posted better than expected profit for the first three
months of 2023 as income soared 37%, even as inflation hammered
households and fierce pricing competition squeezed the bank's
customer deposits.
NatWest reported pretax profit of 1.8 billion pounds ($2.25
billion) for the first quarter, above the 1.6 billion pound
average of analyst forecasts compiled by the bank and the 1.2
billion pounds achieved a year earlier.
Like rival Barclays, which reported results on Thursday,
higher interest rates continued to lift the bank's revenue.
But the higher rate environment does pose challenges for
lenders and NatWest blamed a 19.8 billion pound outflow in
deposits partly on fiercer pricing competition as well as its
disposal of Ulster Bank.
Deposit levels at banks have attracted closer scrutiny after
the rapid collapse of U.S. lender Silicon Valley Bank sparked
jitters across the global banking sector and highlighted how
quickly customers can shift money in the digital era.
NatWest chair Howard Davies, who plans to leave the bank by
the middle of next year, this week said that "poor risk
management" was largely behind recent bank failures and that
NatWest remains resilient.
Bank investors are also wary that inflation remains
stubbornly high in Britain, squeezing household budgets and
raising the risk of borrowers falling behind on loan repayments.
High prices also raise the chances of Bank of England
interest rates staying higher for longer, pushing up borrowing
costs and further crimping consumer spending power.
State-backed NatWest set aside 70 million pounds to cover
potential loan defaults, compared with a small release of cash
reserves the previous year, but it said loan arrears remained
low and the charge was below the 144 million pounds booked in
the previous quarter.
"By monitoring customer behaviour and looking closely for
signs of financial distress we are able to put in place
proactive measures to help those who are struggling right now,"
Chief Executive Alison Rose said.
($1 = 0.8013 pounds)
(Reporting by Iain Withers and Lawrence White
Editing by Sinead Cruise and David Goodman)
