NatWest to return £3bn to investors as Brexit Britain’s economy surges after Covid slump

Natwest CEO Alison Rose grilled over bonuses given by the bank

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The state-backed bank said it would return more than £3billion to shareholders over the next three years. NatWest became the latest major UK bank to report a sharp rise in profits due to the positive economic outlook following a slump due to the coronavirus pandemic.

The swung into a pre-tax profit of £1.6billion from March to June, from a £1.3billion loss during the same period last year.

This profit is well ahead of the average analyst forecasts.

NatWest also announced an interim dividend of 3p, as well as a £750million share buyback.

Its shares fell one percent in early trading.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown: “There are some headline-grabbing shareholder returns in this announcement as the best capitalised of the UK’s large banks starts to wind down its huge war chest.

“Profits have also leapt back into action, boosted by releases from the bad loan provisions set aside at the beginning of the pandemic – the economic fall-out of the pandemic has been less damaging than anyone had expected a year ago.

“However, compared to rivals Lloyds and Barclays, the underlying trends are a bit weak.

“Mortgages have boosted loan growth, but more profitable unsecured lending looks a little sluggish.

“Despite progress on cost-cutting, the bank’s cost: income ratio also remains high compared to rivals.

“Put slow revenue growth and higher costs together and the underlying returns are a bit unexceptional.

“That’s not an insurmountable problem, but together with reducing the government’s remaining 55 percent stake they make for a long to-do list.”

NatWest also said it has reversed £600million of impairments it had taken to cover potential loan defaults throughout the height of the coronavirus pandemic in the first half of 2020.

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During the pandemic, banks set aside billions of pounds to cover future losses.

But thanks to Government schemes such as furlough and business loan schemes have managed to keep rates of default lower than anticipated.

This week, NatWest, Lloyds and Barclays have reduced the size of their bad loan reserves by a total of £1.7billion.

HSBC – which is the last of the UK’s “big four” high street banks – is expected to report its second-quarter earnings on Monday, the Financial Times reported.

Alison Rose, NatWest chief executive, added the results were also helped by “good operating performances across the group”.

She said the revenues were slightly higher and operating costs lower than forecast.

This bounceback comes a week after the UK Government said it would start selling some of its shares on the open market.

This means NatWest will be able to buy back some of its Government stocks.

NatWest had previously avoided open market buybacks amid warnings it would have increased the Treasury’s shareholding in percentage terms.

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