By ScottWright

NATWEST Group, the owner of Royal Bank of Scotland, saw its share price tumble by nearly four per cent as it underlined its concerns over the economic outlook, after beating profit expectations for the first quarter.

Chief executive Alison Rose declared the “world has changed considerably during the last three months” as the bank unveiled a profit of £1.24 billion for the three months to March 31. It had made a profit of £885m at the same stage last year.

However, Ms Rose highlighted concern around Russia’s ongoing invasion of Ukraine and the growing cost-of-living crisis, which saw inflation surge to 7% in March. It is expected to climb higher still after the 54%, or £693, rise in the energy price cap for typical dual fuel customers in April feeds through.

NatWest noted that it had referred 2,100 customers to Citizens Advice, which provided help with “complex financial needs”, in the last year, through its partnership with the organisation. That came after Lloyds Banking Group said on Wednesday that it is reaching out to customers to offer financial advice.

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Ms Rose said: “The world has changed considerably during the last three months. Our thoughts are with everyone affected by the invasion of Ukraine and we are doing all that we can to support them. We are also very aware of the challenges and concerns the cost-of-living crisis is causing for many of our customers up and down the country. NatWest Group is focused on providing practical help and support for the people, families and businesses we serve.

“Despite the challenging environment, I am pleased with our performance as we continue to execute well against our strategy, driving sustainable growth and returns. Income and profits are substantially up, costs are down and we remain well capitalised as we build long-term value and deliver a simpler and better banking experience for our customers.”

Profits increased at NatWest as income grew by 16.8% to more than £3bn during the period, driven by mortgage growth of £2.6bn.

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Excluding Ulster Bank in the Republic of Ireland, which NatWest is in the process of exiting, and other discontinued operations, the bank’s “Go-forward group” saw income rise by 8.6%, driven by volume growth in its mortgage book. Increased fee income was also reported in retail banking as consumer spending levels recovered, with higher transactional banking fee income in the commercial and institutional divisions, chief financial officer Katie Murray noted.

The bank booked an impairment release of £38m, which Ms Murray said “reflects a decrease in underlying exposures, continued positive trends in portfolio performance and write-off activity”.

In March, the UK Government’s stake in the lender fell below the symbolic 50% level for the first time since the financial crisis of 2008 and 2009. The bank, which was bailed out by taxpayers for £45.5bn at the height of the crisis, trimmed the stake to 48% after it acquired £1.2bn of shares from the Treasury.

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Ms Rose said: “Government ownership also reduced to around 48% in Q1; the first time it has fallen below 50% since the financial crisis. This was an important milestone for our bank and a further demonstration of the progress we are making as we continue to deliver for our customers and shareholders.”

John Moore, senior investment manager at Brewin Dolphin, said: “Like its peers earlier this week, NatWest has delivered a strong set of results, with profits ahead of expectations.

“The bank continues to transform, with a potential strategic acquisition in the offing and government ownership falling beneath 50% for the first time since its bailout. Despite the challenges presented by the conflict in Ukraine and the cost of living, there is an optimism in today’s statement from NatWest, which bodes well for the year ahead and it wouldn’t be surprising to see the government’s stake fall further.”

NatWest has been credited with interest in bidding for wealth manager Tilney Smith & Williamson. Shares closed down 8.6p, at 214.32p.