Natwest boss: We’re managing loan book ‘very very closely’ as rates spike
Natwest boss Dame Alison Rose said the bank was seeing “no material signs of distress” in its loan book despite the impact of rising interest rates.
Speaking at the Goldman Sachs financial conference, Rose said: “We have seen no increase in defaults or impairments and the same on the business side… What we’ve actually seen is an increase in confidence.”
The UK has “a really strong, underlying resilience” meaning the impact on credit quality was likely to be lower despite the fact that inflation is “a little bit more sticky” than anticipated, Rose said.
Last month’s inflation figures were higher than forecasts predicted, leading many to think the Bank of England will have to hike rates to as much as 5.75 per cent by the end of the year.
Mortgage rates have surged in response, with some banks like HSBC and Santander pulling swathes of deals before putting more expensive deals back on the market.
Customers coming to the end of fixed-deals, agreed when rates were much lower, may end up having to pay hundreds of pounds more per month.
But Rose said consumers were behaving in a “very rational” way. “We’re seeing customers with higher deposits using the opportunity to pay down more expensive debts… [we’ve seen] businesses using surplus liquidity to pay down their debt,” she said.
Rose also reassured that the bank was managing its commercial real estate book “very, very closely”.
Analysts have raised concerns that commercial real estate valuations will be hit by higher interest rates and the change in working habits since the pandemic. This in turn may impact banks with exposure to the sector.
Rose said Natwest’s commercial real estate book was regularly stress tested and said “there’s nothing in there that is any cause for concern”.