NatWest Group reported a strong third quarter, with operating profits increasing by 23%. The bank now expects income excluding notable items to be around GBP 16.3 billion for 2025, up from GBP 16 billion previously. Return on tangible equity is forecasted to be above 18%, compared to 16.5% previously. Income grew 3.9% sequentially driven by expanding lending and deposit margins, with a 9 basis point increase in net interest margin. Volume growth was solid at 1.1%, while deposits decreased by 0.3%. Operating expenses benefited from lower charges, with costs growing by 1% despite a 3.9% income growth. Impairments were just 15 basis points, below full-year guidance of 20 basis points. Fair value estimate raised to GBX 550 per share, profitability assumptions improved for 2025 and midcycle. Moat rating changed to narrow from none, with NatWest having a leading deposit base in the UK. Expected return on tangible equity at 14% on a midcycle basis due to low-cost funding and strong retail and commercial franchise. NatWest is now a simpler and more profitable bank than a decade ago.

Read more at Morningstar: NatWest Earnings: Another Improvement in FVE for 2025; Upgrade Our Moat Rating to Narrow