Shares in Royal Bank owner NatWest are down more than 8 per cent in early trading after the high street lender followed Lloyds by setting aside extra money to cover an anticipated rise in mortgage and credit card customers defaulting on their debts.
The group's third quarter results included an extra £247 million in bad debt provisions to reflect the deteriorating economic outlook, up from £26m at the end of June. That left pre-tax profits for the period to the end of September flat at £1.1 billion.
NatWest was also hit by a €652m (£563.2m) loss on its Ulster Bank business in Ireland, which it is in the process of exiting.
READ MORE: Profits down as UK’s largest mortgage lender prepares for falling house price
The group is the last of the UK's "Big Four" banks to report this week. Like its peers, NatWest's income has been boosted by rising interest rates, but the sector has been unsettled by the weakening economy and the possibiity of additional taxes being imposed by new Prime Minister Rishi Sunak.
“Today’s quarter three numbers are a reminder if any were needed of how vulnerable banks are to the economic winds blowing through the economy,” CMC Markets analyst Michael Hewson said.
Chief executive Alison Rose said the bank's capital and liquidity levels "mean we are able to help those who are likely to need it the most".
“At a time of increased economic uncertainty, we are acutely aware of the challenges that people, families and businesses are facing up and down the country," she said.
READ MORE: Shares slide in Royal Bank owner following cost-of-living warning
"Although we are not yet seeing signs of heightened financial distress, we are very conscious of the growing concerns of our customers and we are closely monitoring any changes to their finances or behaviours."
State-backed NatWest returned to majority private ownership earlier this year more than a decade after the Governmnet shelled out £45bn it during the global financial crisis. Earlier this month it announced the closure of an additional 43 bank branches across the UK as part of continuing cost savings efforts.
Shares in NatWest were trading 20.1p lower at 227.6p as of 11am.
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