RBS owner NatWest to quit Ireland and resume dividends after £351m loss

Royal Bank of Scotland parent NatWest Group is bringing back its dividend and withdrawing from the Republic of Ireland after revealing a loss for 2020.

NatWest-owned Royal Bank of Scotland has its headquarters and conference facilities at Gogarburn in Edinburgh. Picture: Ian Georgeson

The government-backed banking giant is paying out £364 million to shareholders, a year after pausing dividends as the industry regulator asked lenders to hold on to cash for the pandemic.

The bank announced a 3p per share dividend, the maximum allowed under new Prudential Regulation Authority guidance. It means that the Treasury, which remains NatWest’s biggest investor after its financial crisis bailout, will be paid around £225m.

The group also announced plans to withdraw from the Republic of Ireland, where it runs Ulster Bank.

A review of the Irish bank found that it would not achieve an acceptable level of returns, NatWest said. It will withdraw from the country, trying to keep job losses at a minimum, but Ulster Bank’s operations in Northern Ireland are unaffected.

NatWest chief executive Alison Rose said the move was not related to Brexit.

“Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank will not be able to generate sustainable long-term returns for our shareholders,” she said.

“As a result, we are to begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.”

NatWest posted a pre-tax operating loss of £351m for 2020. It came after the business took a £3.2 billion impairment charge for the year, accounting for loans it expects could fail, to a large extent because of the economic stress caused by Covid-19.

The impairment was below the £3.5bn to £4.5bn previously flagged.

Rose said “customer behaviour is changing” and the group would always keep its “points of presence” under review, amid concerns that more branches could close amid the switch to online and mobile banking.

Donald Brown, senior investment manager at Brewin Dolphin, said: “Despite a headline loss, NatWest’s results have largely come in ahead of consensus expectations.

“Provisions for bad loans are lower than anticipated and, following on from Barclays, the resumption of the dividend will no doubt be a welcome boost for shareholders.

“Cost reduction appears to be ahead of schedule and the withdrawal from Ireland is another move towards simplifying the business, marking a further break with the past whilst freeing up capital.”

Freetrade’s senior analyst, Dan Lane, noted: “NatWest has had to put a hefty chunk of cash aside to deal with any loans going sour this year. But with the lion’s share of mortgage payment holidays returning to paying as normal in the retail banking division, there are signs of hope.

“And it looks like it’s time to jettison the non-performing parts of the business. There was already talk of NatWest getting rid of the bulk of its [Edinburgh-based] Adam & Co operations but now there’s also a big ‘for sale’ sign on the southern Irish part of the portfolio too.

“Alison Rose is making a name for herself as a no nonsense leader, keeping the core business healthy by adding to its core business and chopping off the gangrenous limbs.”

A message from the Editor:

Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions