RBS owner NatWest and Barclays in sharp focus with full-year numbers

Dividends, bonus payments and coronavirus lending numbers will come under scrutiny this week when the bank reporting season gets into full swing with full-year results due from Royal Bank of Scotland owner Natwest Group and Barclays.

Royal Bank of Scotland, which forms part of NatWest Group, has its headquarters and conference facilities at Gogarburn in Edinburgh. Picture: Ian Georgeson
Royal Bank of Scotland, which forms part of NatWest Group, has its headquarters and conference facilities at Gogarburn in Edinburgh. Picture: Ian Georgeson

Major lenders last year scrapped dividends after pressure from the Bank of England but the Prudential Regulation Authority (PRA) recently allowed banks to resume paying divis, albeit on a limited basis.

Barclays kicks off with results on Thursday, when it is expected to announce underlying pre-tax profits, with charges and litigation costs stripped out, down 55 per cent to £2.8 billion for 2020 due to mammoth charges set aside for loans turned sour.

Reports suggest that chief executive Jes Staley is still in line for a bonus, though likely a fraction of the £2 million maximum for the annual award and far less than the £3.1m he landed in bonuses and long-term share incentives for 2019.

He joined counterpart bosses in announcing a cut to his fixed pay at the height of the crisis last year, but declined to rule out bonuses for his employees at third quarter results in October.

State-backed NatWest, which is due to report results on Friday, is understood to be planning to share out a bonus pool for staff, but the smallest since its government bailout more than 12 years ago.

Chief executive Alison Rose, who took the reins in November 2019, has already said she would forgo any long-term incentive bonus shares – worth a potential £1.9m – for 2020.

Susannah Streeter, senior investment and markets analyst at financial services firm Hargreaves Lansdown, said: “NatWest has proved more than resilient than expected given the economic damage wreaked by Covid on the UK economy. The bank has a large number of small and medium sized business customers and there was a surge in companies seeking access to emergency funding during the lockdown.

“NatWest still faces the long-term challenge faced by all UK banks about how to make money when super low interest rates increasingly look like they’re here to stay.

“Although the worry of negative rates has been kicked into the long grass for now, record low rates remain a challenge. The bank, which is still 62 per cent owned by UK taxpayers, after a £46bn bailout in 2008, is still the best capitalised major bank in the UK, but growth options are few and far between.”

Barclays set aside an eye-watering £4.3bn for expected loan losses in the first nine months of 2020 as it braced for a slew of households and businesses defaulting on their repayments.

The bad debt charges sent its interim profits tumbling to £1.27bn from £3bn a year earlier.

But the UK government’s furlough scheme and support measures have been helping cushion the blow and Barclays revealed a better than expected profit of £1.1bn in the third quarter.

NatWest also beat gloomy third-quarter expectations as it swung to a £355m profit against predictions of a loss.

Richard Hunter, head of markets at Interactive Investor, noted: “Headwinds remain for the sector in light of historically low interest rates, which put severe downward pressure on margins.”

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Reaction: NatWest swings into profit with lower-than-expected impairments

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