Main Menu

Making progress

NatWest RBS back in profit and restores dividend

RBS and Alison Rose

Alison Rose: ‘good operating performances’

NatWest, parent of Royal Bank of Scotland, has announced a return to profitability and a restoration of its dividend.

The bank posted an operating profit before tax of  £2.5bn (£1.6bn in Q2) against a loss of £770m at H1 2020.

Attributable profit came in at £1.8bn (£1.2bn in Q2) against a loss of £705m in the first half last year.

The bank declared an interim dividend of 3p per share and a share buyback of up to £750m.

There is a release of an impairment charge of £707m (£605m in Q2).

Newsletter

Chief executive, Alison Rose, said: “These results have been driven by good operating performances across the Group, underpinned by a robust loan book and a strong capital position.

“Defaults remain low and, given the improved outlook, we have released a further £0.6 billion of impairment provisions in the quarter. While we see the potential for a more rapid recovery, we will continue to take an appropriate and conservative approach as the government schemes wind down and the economy reopens.

“As a result of our strong and resilient performance, coupled with our capital strength and cautiously optimistic outlook, we are announcing an interim dividend of 3p per share and share buyback of up to £750m.

“We are also increasing our minimum annual distribution to shareholders to £1bn for the next three years. Taken together, this means our total distributions for 2021 will be a minimum of £2.9bn.

“We continue to make progress against our strategic targets and to accelerate our digital transformation as we build a bank that is relevant to our customers in every region of the UK and that supports them at every stage of their lives.

“As the UK’s leading business bank, we are determined to remove barriers to entry and help the economy build back better.

“Against the background of an ongoing pandemic, our commitment to helping people, families and businesses to rebuild and thrive has never been more important. Because if they thrive, so will we.”

In a conference call, Ms Rose said there were no plans for compulsory vaccination against Covid-19 for employees returning to offices.

Digital transformation

  • 8.0m active mobile users – up from 7.3m in H1 ‘20. 
  • 60% of retail customers now only use digital to interact. 
  • Video banking – average of almost 12k interactions/week, up from around 0.8k at H1 ’20.
  • Investing £3bn over the next 3 years, 80% on digital and tech transformation.

Business

  • Published “Springboard to Recovery” report into the support needed to help SMEs build back. Committed £6bn to supporting SMEs scale and grow – 2/3 allocated outside London.
  • Doubled funding to female entrepreneurs to £2bn.
  • 35k individuals or businesses supported through enterprise programmes – 76% outside London, 53% female-led, 32% Black, Asian and minority ethnic.

Market reaction

John Moore, senior investment manager at Brewin Dolphin, said: “Results this week from the major UK banks have been like a scratched record – but for long-suffering shareholders the music has, at least, been worth listening to.

NatWest has reported a solid capital position, strong profits, a large impairment release, and a hike to shareholder distributions.

“The bank has largely navigated the pandemic well and managed to continue on its transformation programme, which saw it make a deliberate break with the past.

“The news flow from NatWest looks like it will get progressively better as the government aims to sell down its stake over the next year or so – notwithstanding the uncertainties of the UK economy emerging from the pandemic.”

AJ Bell financial analyst Danni Hewson, said the market had shown little excitement for NatWest’s figures.

“Increased distributions to shareholders and better than expected results following up on last week’s road map to full privatisation – you’d think the market would be made up with Natwest.

“However, its latest results have been met with a shrug as investors reflect on the lack of any special dividend, the fact that the better-than-expected profit was mainly driven by the release of provisions built up as a buffer in the pandemic and the sobering reality that even if the Government sells 15% of its stake as planned and returns Natwest to private control, it will still own a chunky 40% of the business.

“Current CEO Alison Rose is just the latest person to try and lift a business which was left on its knees by its disgraced former boss Fred Goodwin in 2009. She has done a solid job and has steered Natwest successfully through another crisis in the form of the coronavirus pandemic. 

“Will 2022 finally be the year she can start operating without one hand tied behind her back due to the majority of the bank being owned by the taxpayer?

Comment: Upstarts beware as big banking roars again



Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.