NatWest profits rise as bank reels from Nigel Farage banking debacle | Economic news

NatWest reported better-than-expected half-year profit growth as the taxpayer-backed lender reels from Nigel Farage’s banking debacle.

At the end of a week in which its chief executive, Dame Alison Rose, was forced to resign over her own role in the row, the bank revealed £3.6billion in pre-tax profits, down from £2 £.6 billion made in the same period last year. year, as its net income was boosted by rising interest rates.

It has made an additional provision of more than £220million for bad debts in a tough economy, but said it was currently seeing a low level of arrears and defaults due to rising mortgages and other borrowing costs.

NatWest has given an update on its progress after two days of its share price falling, resulting in a £1bn loss in market value – a reaction to its leadership plummeting due to the Farage fallout.

Dame Alison was expelled after admitting she had been the source of an inaccurate story in the media about why the Brexit politician’s account with Coutts, a division of NatWest, had been closed.

CEO of Coutts Pierre Flavel followed her out the door on Thursday.

Mr Farage has demanded the resignation of the entire board of the group, including chairman Sir Howard Davies, who initially backed Dame Alison’s position before an apparent change of heart amid government anger .

Lenders have since been dragged into the Treasury, with regulators also pressuring the sector to ensure anyone has access to banking services, regardless of political views or perceived beliefs.

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The row has overshadowed the banking earnings season with NatWest’s figures for the first half of 2023, like rivals Lloyds and Barclays so far, showing the benefits of higher interest rates as the Bank of England pursues his campaign against inflation.

Financial analysts had expected profits closer to £3.3bn for the period for the bank, which announced an interim dividend of 5.5p per share and a share buyback of up to £500m pounds sterling for the current second half.

The net interest margin – a key indicator for financial analysts that shows the difference between what the bank charges borrowers and pays depositors – stood at 3.2%.

That figure was up from 2.6% at the same time a year ago, but was lower in the second quarter – mirroring Lloyds – as banks came under political pressure to pass on better rates to savers.

Sky business presenter Ian King said Dame Alison’s management of the bank’s financial performance was evident in the numbers – particularly in its growth in mortgage market share.

“It really is a bank that was doing very, very well under Alison Rose,” he said.

She will be officially replaced, on an interim basis, by Paul Thwaite who headed the group’s commercial and institutional banking division.

Chief Financial Officer Katie Murray said of the results: “NatWest Group’s strong performance for the first half of the year is underpinned by our strong balance sheet, with a high quality deposit base, high levels of liquidity and a well-diversified loan book.

“As a result, we are able to continue to lend to our clients and deliver sustainable returns and distributions to our shareholders, even in the current uncertain economic environment.”

While arrears remain low, we know people, families and businesses are worried about their finances and many are experiencing real difficulty.

“We are proactive in our support for those hardest hit, helping to build the financial resilience of the
the customers and communities we serve.”

Shares, down 10% year-to-date before Friday’s open, fell slightly in early trading as analysts noted their disappointment that the net interest margin was not higher.

Matt Britzman, equity analyst at Hargreaves Lansdown, added: “Perhaps more importantly, the full year guidance has been pulled lower, reflecting the continued shift of deposits to accounts that offer better rates as consumers are doing all they can to make the cash savings go further.