FTSE 100 lower as NatWest shares slide after a rise in debt provision

NatWest says it took a provision of £247 million, while analysts had estimated this would be closer to £170mln.

On the bright side, interest earnings are up on the back of higher rates.

(Video Transcript)

NatWest under pressure

NatWest bank this morning came through with a similar sort of message we've seen from other UK banks this week that there's an increase in bad debt provisions because of the increased concerns around the consumer and household budgets.

The company came through with third quarter (Q3) figures. Let's take a look at the numbers that we saw from NatWest today.

Profit was down to £2.27 billion from £2.8 billion this time last year. So far as group pre-tax operating profits were £1.1 billion, up almost 20% year-over-year (YoY), but missing a consensus estimate of £1.2 billion.

So like rival Lloyds, NatWest is taking a larger than expected provision for future loan losses, which it said reflects the changes in its view of the British economy. The lender took provision to £247 million, above analyst estimates of £137 million and compared with £242 million on the release of the pandemic provisions in the same period last year.

Share price chart

So whichever way you cut it, it was bad. And in fact you look at the share price chart you can see that despite this long-term chart that we go back here to July 2021 where we see a small updraft, you can quite clearly see the reaction today in the shares. So not too far off the lows that we saw early this morning. We're down 8% on the trading day after an hour and 20 minutes worth of the session so far today.

So the company clearly disappointing the markets but as I say the longer term picture remains where we've got gains and we're nowhere near the Covid losses that we had down at this line here at $0.97. Currently trading at 227.4 for NatWest group after its numbers out this morning for the third quarter.