Brexit Britain bounceback sees NatWest return £1.7bn to UK as profits soar
NatWest Chief Exec defends £298m bonus pot
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As economic activity has picked up since the pandemic banks have stood to benefit with growing demand for loans and other financial services. Britain’s booming property market has been a particular driver with NatWest seeing rapid growth in mortgages, helping its net lending grow by £7.8 billion last year. Full year net profits for 2021 reached £2.95 billion, reversing the bank’s fortunes after a loss of £351 million in 2020. NatWest has been majority owned by the Government since it was rescued during the 2008 financial crisis with the Treasury taking a stake of just over 50 percent.
The taxpayer, therefore, stands to benefit from its latest announcements to the tune of £1.7 billion of a total £3.8 billion being distributed to shareholders.
The distribution will take the form of both dividend payments and a share buyback where the number of shares in circulation is reduced, pushing up the value for the remaining holders.
NatWest Chief Executive Alison Rose said: “As our economy recovers and the trend towards digital services accelerates, we are investing to deliver long term value in the bank and drive sustainable growth.
“We will do this by building closer and deeper relationships with our customers and by supporting their evolving needs and expectations at every stage of their lives.”
The bank has also revealed it will increase its bonus pool by 44 percent to £298m after it was cut last year.
Despite the rise in profits NatWest has recently attracted some criticism for branch closures with 32 branches across its NatWest and Royal Bank of Scotland brands set to be axed this year.
The bank has blamed a shift in customer behaviour with more people opting for mobile and online banking.
Indeed today’s annual report revealed 60 percent of current account customers exclusively bank using digital channels.
NatWest has kicked off results seasons for UK banks with annual reports from names such as Barclays, HSBC and Metro Bank expected in the coming weeks.
AJ Bell Financial Analyst Russ Mould commented that NatWest had got off to “a subdued start in terms of its share price” which slipped nearly two percent this morning.
He explained: “The banking sector is one of the few industries which will be waving flags and cheering as interest rates are increased as it allows them to generate a higher return from their lending activities.
“The better than expected earnings and hike in the outlook were, to some extent, baked in, and investors may be concerned about the possibility of an increase in bad debts as its customers face a cost of living crisis.
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“This could outweigh any boost to profitability from higher rates.
“NatWest seems relaxed on this score and has actually reduced its guidance on impairments – whether that view will be tested in 2022 remains to be seen.”
Meanwhile, the Government is expected to look to lower its stake in the bank and has already been selling off chunks of its holdings with a recent sale of £420 million worth of shares.
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