Analysts cautious over NatWest's outlook after £2bn hit due to coronavirus

NatWest Group, formerly Royal Bank of Scotland, said it has taken a £2.1 billion hit from the impact of the coronavirus, worse than the most dire predictions by analysts.

Chief executive Alison Rose. Picture: Nick Ansell.

The bank’s second-quarter impairment charge was set aside to cover the bad debts that NatWest thinks might be on its books. It pushed the bank into a loss for the first half of the financial year. Pre-tax loss was £770 million, a swing from a £2.7bn profit in the same period a year earlier.

An average of analysts’ predictions, compiled by the bank, had forecast that NatWest would reveal a £943m hit. Even the most pessimistic analyst did not think the impairment would reach more than around £1.5bn.

Chief executive Alison Rose said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19. However, NatWest Group has a robust capital position, underpinned by a resilient, capital-generative and well-diversified business.”

As the pandemic spread, the Treasury announced it would back what turned out to be millions of loans provided through high-street lenders. So far, NatWest has lent £5.8bn through the bounceback scheme, and £2.3bn in coronavirus business interruption loans.

Rose added: “Throughout this crisis, we have provided exceptional levels of support to our customers, colleagues and the communities we serve. I am proud that our colleagues have consistently shown they are putting our purpose at the heart of everything they do.

“Through our strong balance sheet and prudent approach to risk, we are well placed not only to withstand Covid-19-related impacts, but also to provide the right support to those who will need it most in the tough times to come.

“Our purposeful strategy will help our customers, colleagues and communities to recover, rebuild and, ultimately, to thrive. We are building a sustainable business that will generate lasting value for all our stakeholders, as we work together to create a greener, fairer and more inclusive economy.”

Donald Brown, senior investment manager at Brewin Dolphin, said banks’ share prices are down significantly this year, “in NatWest’s case more than 50 per cent”. He added that there is likely to be a “treacherous” road ahead for NatWest and many of its peers.

Hargreaves Lansdown equity analyst Nicholas Hyett said: “NatWest’s first outing under the new masthead is far from pretty. [It] is by far the best capitalised big bank in the UK, but with clear growth options few and far between and dividends or buybacks off the table for now, we’re not sure the group’s able to make the best use of its position of strength.”

SCOTSMAN.COM

A message from the Editor:

Thank you for reading this story on our website. While I have your attention, I also have an important request to make of you.

The dramatic events of 2020 are having a major impact on many of our advertisers - and consequently the revenue we receive. We are now more reliant than ever on you taking out a digital subscription to support our journalism.

Subscribe to scotsman.com and enjoy unlimited access to Scottish news and information online and on our app. Visit https://www.scotsman.com/subscriptions now to sign up. By supporting us, we are able to support you in providing trusted, fact-checked content for this website.

Joy Yates

Editorial Director