NatWest nearly doubles profits in first quarter

NatWest nearly doubles profits in first quarter

April 29, 2021

Bank credits government support programmes for preventing wave of customer defaults during Covid crisis

Last modified on Thu 29 Apr 2021 04.13 EDT

NatWest Group nearly doubled profits in the first quarter, as it credited government support programmes for preventing a wave of customer defaults during the Covid crisis.

The bank said there were now “reasons for optimism” thanks to the success of the UK’s vaccine rollout, meaning it could reduce the pile of cash reserved to cushion the blow of potential customers defaults, particularly among business borrowers, by around £102m.

The move surprised analysts, who had expected NatWest, which put aside £3.2bn to cover bad debts in 2020, to increase its reserves by £251m.

The release, alongside cost cuts and a jump in mortgage lending, helped lift pretax profits by 82% to £946m over the three months to March. That compares with £519m a year earlier, when profits were halved due to a larger-than-expected £800m Covid loan loss provision. The bank easily beat average City forecasts that anticipated profits of £536m for the first quarter.

The NatWest chief executive, Alison Rose, said the jump in profits was “a result of a good operating performance in our core franchises as well as modest impairment releases that reflect the better-than-expected performance of our loan book across the first three months of the year”.

“Defaults remain low as a result of the UK government support schemes and there are reasons for optimism with the vaccine programmes progressing at pace and restrictions being eased,” she added.

While the banking boss warned of continued uncertainty for the UK economy and many of NatWest’s customers as a result of the ongoing crisis, she assured that NatWest was well capitalised to weather the rest of the pandemic and help customers “rebuild” in the wake of the outbreak.

The Edinburgh-headquartered bank said total income fell nearly 16% to to £2.7bn in the first three months of the year, partly owing to a drop in customer spending and lower interest rates, following the Bank of England’s decision to slash rates to record lows of 0.1% at the start of the pandemic last year.

Consumers – particularly those whose kept their jobs throughout the crisis – have broadly reduced spending during Covid lockdowns and saved their money instead. That trend led to a 17% rise in customer deposits at NatWest in the first quarter, which totalled £453bn at the end of March, compared with £385bn at the same time last year.

Source: Read Full Article