NatWest beats gloomy expectations as it swings into profit

Bank boss cautions that ‘the full impact of Covid-19 remains very unclear’

NatWest became the latest bank to beat gloomy expectations as it reported a profit when analysts had predicted a loss (PA)

NatWest Group has reported a profit in its latest quarter despite analysts predicting a loss, with the bank’s boss hailing its “resilience”.

The company, which owns the Royal Bank of Scotland, said on Friday that its pre-tax profit had hit £355m in the three months to September, easily beating the £75m forecast loss. In 2019, NatWest lost £8m over the same period.

Alison Rose, chief executive of NatWest, said: “These results demonstrate the resilience of our underlying business and the strength of our balance sheet in the face of significant continued uncertainty.

“Our sector-leading capital position, strong levels of liquidity and consistent approach to risk mean we can continue to provide our customers and communities with the support they need.”

The bank had been predicted to report impairment charges worth £628m, but was helped by a lower-than-expected figure of £254m.

Impairment charges account for money that a bank has loaned but does not expect to get back. Impairments are a normal part of everyday banking but can rise during times of economic downturn, such as the one cause by the coronavirus pandemic.

However, the new report means that impairments will come in at the lower end of NatWest’s own full-year predictions of between £3.5bn and £4.5bn.

Ms Rose cautioned that although impairments were relatively low in the third quarter and there had been “some positive trends” across the bank’s customer base, “the full impact of Covid-19 remains very unclear”.

“Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19-related restrictions are introduced.”

Ms Rose also said on Friday that NatWest has “no current plans to change our pricing structure” after HSBC indicated earlier this week it could start charging customers for current accounts.

HSBC, Europe’s largest bank, said it is “committed” to keeping basic bank accounts free of charge but will keep fees “under review” in anticipation of already-low interest rates going negative to boost the economy.

Asked if she would rule out ever charging for a current account, Ms Rose said NatWest had “no plans to do so at the moment”.

She was also asked when dividends would return and said it is her intention to start paying them again as soon as possible.

The Bank of England’s Prudential Regulation Authority (PRA) asked banks in the early days of the coronavirus pandemic to stop paying dividends to their shareholders to ensure that billions of pounds remained available to support the economy instead.

“The PRA has indicated they will update their guidance in the fourth quarter and we will wait for that and then we will set it in the normal course,” said Ms Rose.

The bank also reported that it had paid £90m in redundancy costs, £223m in strategic costs, a £21m property charge and £34m on technology.