NatWest's first-quarter profit fell by a less than expected 27%, it said on Friday, hit by a hiatus in rising central bank interest rates that drove mortgage market competition and squeezed margins across the British banking sector.

The bank said pretax operating profit for the January-March period was 1.3 billion pounds ($1.63 billion), down from 1.8 billion pounds a year earlier and just above the average of analyst forecasts at 1.2 billion pounds. ($1 = 0.7998 pounds) (Reporting by Lawrence White Editing by David Goodman )