Boost for NatWest investors with profits set to top £4 billion

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The bank, which owns Royal Bank of Scotland and Ulster Bank among others, will present a multibillionpound profit, analysts expect. As the business made a £3.6billion pre-tax profit in the first nine months of 2021, anything less than a massive improvement on its £351million loss in 2020 will be very unexpected.

Analysts forecast that operating profit before tax will reach just above £4billion, including a £438million profit over the last three months of the year.

It would be the worst quarter of the year. However, AJ Bell financial analyst Danni Hewson said: “That is relatively normal for banks as they tend to clean up and clear out their books in the final three-month period.”

The results come amid rising interest rates around the world. Earlier this month the Bank of England upped its base rate for the second time in less than two months.

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: “Interest rate hikes are bad news for most businesses, but not banks.

“Since they make money on what they can charge customers versus the rate they receive on deposits, the benefits will soon start to stack up.

“We’re therefore expecting a reasonably sprightly tone from the NatWest Group.”

It has been a good year for NatWest shareholders. In the last 12 months shares have soared 44 percent, much higher than the 17 percent that the FTSE 100 has seen overall.

Shareholders might be hopeful that NatWest can repeat its performance from the last quarter when profits were around £400million higher than experts had predicted.

But a large part of that was due to the release of £242million that the bank had set aside in a rainy day fund to cover loans that might have gone bad during the Covid-19 crisis.

Ms Lund-Yates added: “Operating profits in the first nine months of the financial year were buoyed by the release of £949million, which had been put aside in case people defaulted on their loans during the worst of the pandemic.

“This time around, this helpful tailwind won’t be blowing as strongly so we’ll be keenly focused on the underlying profit figure.”

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