NatWest profits jump to £3.6 billion in torrid week but margins fail to impress: reaction

Royal Bank of Scotland parent company NatWest Group insisted it was being “proactive” with its support for cash-strapped personal customers and businesses as it revealed a near-£1 billion surge in profits.

The banking giant, which has been caught up in a bruising row involving Nigel Farage over the closure of his bank account, reported a “strong” financial performance for the first half of the year. Its operating pre-tax profit leapt to about £3.6 billion in the six months to the end of June, up from £2.6bn in the same time last year. Analysts had been expecting a profit haul of some £3.3bn for the latest period. However, City watchers also pointed to disappointing margin guidance as consumers shop around for better rates.

The lender, which remains almost 40 per cent owned by the taxpayer, has benefited from higher interest rates, which has pushed up the cost of borrowing, and greater mortgage lending. But the financial results come at a time of volatility for the group, with chief executive Dame Alison Rose resigning in the early hours of Wednesday morning after admitting to being the source of an incorrect BBC report on Farage’s finances. The boss of Coutts, the private bank which shut down Farage’s account and is owned by NatWest, stepped down on Thursday.

NatWest’s chief financial officer, Katie Murray, said it was a “strong performance” for the first half of the year. She told investors: “NatWest Group’s strong performance for the first half of the year is underpinned by our robust 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 lending to our customers and delivering sustainable returns and distributions to our shareholders, even in the current uncertain economic environment.

The bank faced a backlash from some quarters in 2020 when it changed its parent company name from Royal Bank of Scotland to NatWest Group. It stressed at the time that there would be no change to its customer-facing brands, with branches in Scotland continuing to operate under the Royal Bank of Scotland/RBS banner.

“Although arrears remain low, we know that people, families and businesses are anxious about their finances and many are really struggling. We are being proactive in our support for those who are hardest hit, helping to build the financial resilience of the customers and communities we serve.”

Matt Britzman, equity analyst at investment platform Hargreaves Lansdown, noted: “It’s been a week to forget at NatWest as it’s had to lose two of its top execs because of the Nigel Farage account closure debacle. [These] results probably don’t do the group any favours either, despite a slight beat on the bottom line. We know markets are laser-focused on net interest margin and at 3.13 per cent for the second quarter that was below expectations, leading to a miss on net interest income. But perhaps more importantly, full-year guidance has been dragged lower reflecting the ongoing deposit shift to accounts that offer better rates as consumers do all they can to make cash savings go further.”

James Fox, equity research analyst at InvestingReviews.co.uk, added: “Following the recent departures of NatWest Group’s CEO and the CEO of high-wealth division Coutts, investors can find some relief as the bank’s earnings largely align with expectations. NatWest has been through some significant political turbulence over the past fortnight but its bottom line, for now at least, is unscathed.”