NatWest shares slide on weaker than expected interest income outlook

LONDON, Oct 30 (Reuters) - NatWest shares fell 8.4% on Friday and were on track for their biggest one-day drop since March 19 after management gave a weaker-than-expected outlook for interest income, highlighting mounting competitive pressures in the UK banking market.

Like rivals HSBC and Lloyds, NatWest reaffirmed, rather than upgraded, its full-year targets, disappointing investors who had hoped for a stronger outlook despite a solid quarterly performance.

• NatWest reported third-quarter operating pretax profit of £2.2 billion ($3.0 billion), in line with analysts' average forecast

• Executives told analysts they expect net interest margin to remain "broadly stable" at 2.5% into 2027, versus consensus expectations for higher growth, underscoring pressure from stronger competition and lower interest rates

• The bank's cost-to-income ratio improved to 45.7% in the year to date, 2.1 percentage points lower than a year earlier, helped by about £420 million of gross cost savings as it cuts jobs and invests in AI

• Jefferies analyst Jonathan Pierce said the quarter showed UK banks "tearing off the band-aid" by lowering expectations for interest income growth as margin pressures intensify($1 = 0.7456 pounds)

(Reporting by Lawrence White; Editing by Tommy Reggiori Wilkes and Mark Potter)