NatWest et al: back in the money
What a difference a year has made for British banks, said Jill Treanor in The Sunday Times. Twelve months ago, in the grip of lockdown, high-street lenders – “laden with multibillion pound provisions” for loans they expected not to be repaid – “were grappling with an order from the Bank of England to prepare for negative rates”. Now they face the opposite scenario and worries about bad debts have abated, for now. City analysts are expecting the Big Four to report total profits of £34bn for 2021, with Lloyds and Barclays notching up their highest earnings for decades. Shareholders can look forward to payouts, bankers to bumper bonuses – and a likely backlash from customers facing a cost of living crisis.
“Bailed out” NatWest provides the clearest illustration of the sector’s reversed fortunes, swinging from a £351m loss last year to a projected profit of some £4bn. And now “a minor miracle is about to happen”, said Nils Pratley in The Observer. Fourteen years after the former Royal Bank of Scotland’s £45bn state rescue, the state’s stake is likely to fall below 50%. “Hallelujah.” The real interest for investors this week, though, was CEO Alison Rose’s “outlook statement”. NatWest, along with Lloyds, “offers a good guide to the underlying health of the UK economy, and the mood may be shifting”.
Despite the setback of a £264m fine for antimoney laundering failures, Rose’s “clean-up campaign” is going rather well, said Ruth Sunderland in the Daily Mail: shares are up 47% in 12 months. Some “will never forgive” NatWest/RBS for its “appalling behaviour” before the financial crisis, and its “terrible treatment of small firms”. But if Rose has her way, the “toxic” Fred Goodwin era “will finally be consigned to memory”.