Speaking in a fireside chat at the Morgan Stanley European Financials Conference, Alison Rose (pictured), group chief executive Natwest, said that mortgages “remain a very attractive asset class for us [Natwest’]”.
Rose added that it had “capacity to grow mortgages [into] a much more diversified model”.
She added that the company had 16 per cent share of current accounts, which was “below” its “natural market share in mortgages”.
“We are growing that sensibly, balancing volume and value in the right way so that we’re keeping that sensibly balanced. And our growth into areas like youth and affluent [is] very strong,” Rose noted.
She continued that there were some “very volatile moves in the swap market” currently, which had led to the firm increasing its pricing.
“I mean obviously there’s always a lag with the speed and the volatility that was in the swap curve, but we put through 20 to 30 price increases in the mortgage market. Where the margins are settling in the mortgage market, in terms of our application rates, we’re very comfortable.
“They’re making good returns for us. They’re still return on equity (RoE) accretive business. It’s secured. We are a predominantly fixed book as about 92 per cent of our customers are on fixed rate,” Rose explained.
She continued that the market had “responded and re-priced to the swap curve”, but it had to consider the liability side. Liabilities refer to money that a company owes to outside parties.
‘Mortgages drive good returns for us’
“Our strategy is to balance returns across both the asset and liability side to get a balanced return. But the mortgages that we’re writing are a good asset quality, good asset class, good loan to value with an average 53 pr cent, and continue to perform well and drive good returns for us.”
Rose said that the housing market “continues to be very resilient and relatively stable”.
She said: “The market is behaving in a very orderly way from a competitive perspective and as you look into our provisioning and our stress testing, you can see that we’re able to withstand any sort of cycles that go through.”
