Natwest income attain £2bn on enhance from greater for longer charges however lender warns of stagflation

Natwest reported a surge in profits in the first quarter as higher interest rates boosted income, but the High Street lender slashed its economic forecasts amid the Iran war.

Natwest’s pre-tax profits rose 12 per cent to £2billion from a year earlier, having generated £4.4billion of revenues. Analysts had expected the High Street bank to generate £1.9billion of profits from £4.3billion in revenues.

Its net interest margin – the difference between what it makes on loans and pays out on savings – rose to 2.47 per cent, from 2.27 per cent a year earlier.

Natwest now expects to generate between £17.2billion and £17.6billion income for the year, at the top end of its previous guidance.

Chief Executive, Paul Thwaite, said: ‘We have started the year with positive momentum, underpinned by healthy customer activity – growing all of our three businesses’.

Natwest boasted higher quarterly profits but warned of a slowing economy

Natwest joined Lloyds and Barclays in reporting higher quarterly profits and margins this week as the Iran war keeps interest rates higher for longer.

While the Bank of England kept the base rate at 3.75 per cent at its meeting on Thursday, it warned borrowing costs may need to rise to combat the financial fallout of the war.

Natwest said it had set aside £140million to deal with the ‘weakened’ economic outlook. The lender anticipates inflation is likely to peak above 3.5 per cent, with economic growth slowing to 0.4 per cent and the unemployment rate rising to 5.7 per cent.

It said it had given the ‘extreme downside’ scenario a higher weight because of the ‘rising risk of stagflation’ – a period of high inflation paired with weak economic growth and employment.

That would also see the ‘crystallisation of physical risks’ and surging energy prices, leading to double-digit inflation.

Earlier this week, Lloyds warned that the ‘stagflationary consequences’ of the conflict could last well into next year.

Natwest shares fell 3.7 per cent to 563.6p in early trading.

Chris Beauchamp, chief market analyst at IG said: ‘NatWest, like other UK banks, has been the gift that kept on giving over the last two years, but now with the shares trading at such an elevated level results like today aren’t enough to drive further upside.

‘While the figures are in line with Lloyds’, the outlook is now tied to the broader UK economy, and on this front the picture seems set to get worse before it gets better, particularly if the doom-laden ‘Scenario C’ outlined by Andrew Bailey yesterday comes to pass.’