NatWest Group has become the latest banking giant to report better-than-expected third-quarter profits after a jump in lending and deposits. 

The Royal Bank of Scotland owner revealed a £1.7billion pre-tax operating profit for the three months ending September, compared to analyst forecasts of £1.5billion.

Earnings were bolstered by income rising by 7.3 per cent year-on-year to £3.7billion, thanks to higher lending volumes, deposit margin growth and heightened customer activity in capital markets.

Its net interest margin - the difference between what banks pay savers and charge borrowers - increased by eight basis points from the previous quarter to 2.18 per cent.

At the same time, net loans to consumers expanded by £8.4billion, much of which came from acquiring Metro Bank's residential mortgage portfolio.

NatWest's profits further benefited from operating expenses falling by £102million to around £1.8billion, partly owing to staff cuts and the non-repeat of property disposal losses.

But NatWest declared £245million of impairment charges for the period, against £45million of releases in the equivalent period last year. 

This was above the £173million analysts had expected the bank to put aside for bad loans. 

NatWest now expects a return on tangible equity surpassing 15 per cent and income, excluding notable items, of about £14.4 billion.

Paul Thwaites, chief executive of NatWest, said: 'With customer activity increasing, defaults remaining low and optimism amongst businesses and consumers, we are well placed to succeed with our customers and for our shareholders in the months and years ahead.'

NatWest's results come just after Barclays and Lloyds both also announced they had surpassed analyst projections in their third-quarter results.

Barclays declared its pre-tax profits climbed by 18 per cent to £2.2billion in the July to September period, supported by dealmaking at its investment banking division.

And on Tuesday, Lloyds Banking Group reported £1.8billion in pre-tax profits, which it credited to structural hedge earnings boosting total income levels.

Structural hedging is a financial strategy banks use to preserve profits against the fluctuations of interest rate movements.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: 'Looking ahead, the start of an interest rate-cutting cycle has relieved pressure on deposits and mortgages.

'All the while, the anticipated economic pain of higher rates never really came to pass – or at least hasn't yet.

'That leaves NatWest in a nice spot to benefit from improving trends and lean on the structural hedge, which will act as a strong driver of medium-term earnings.'

NatWest Group shares rose 5.2 per cent to 380.5p on Friday morning, making them the FTSE 100 Index's top performer, and taking their gains to around 72 per cent since the year started.