Natwest warns of challenges despite returning to profit
NATWEST Group swung to a profit in the third quarter after setting aside less cash to deal with virus-induced loan defaults, but warned of “challenging times ahead”.
The bank, which remains 62pc stateowned after a £46bn bailout during the 2008 financial crisis, posted a £355m pre-tax profit for the three months to September, beating analyst estimates of
a £75m loss, due to lower provision.
Alison Rose, the chief executive, insisted the bank was not looking to start charging for basic banking services, after HSBC hinted at changes this week, as a result of ultra-low interest rates.
She said there was “clearly pressure on the current model” and the bank was already offering more accounts that could attract fees.
Natwest was “ready to deal” with negative interest rates, Ms Rose said, despite chairman Sir Howard Davies saying earlier this month that lenders were unprepared and faced “technical issues and many contractual issues”.
Despite the better-than- expected quarter, she sounded a cautious note on Natwest’s outlook as the furlough job support scheme ends and the threat of further lockdowns looms.
“Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid19 remains very unclear,” Ms Rose said.
“Challenging times lie ahead, especially as the current Government support schemes come to an end, and as new Covid-19 related restrictions are introduced.”
Known as Royal Bank of Scotland until earlier this year, Natwest factored in a further £ 254m provision for expected bad loans, compared with its forecast of £628m. Full-year provisions for bad loans would be at the lower end of its £3.5bn to £4.5bn range, it said.
Last year, the bank made an £8m pretax loss for the same period.
It comes after rivals Lloyds, Barclays and HSBC also set aside less cash for bad loans in their third-quarter updates this week compared with earlier in the year.
Shares rose 6pc to close at 124.2p. They were trading above 220p before the crisis hit in February.