NatWest reports profit rise amid fallout from Farage fiasco

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Last Updated, Jul 28, 2023, 7:36 AM

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A sign outside a NatWest Group Plc bank branch in the City of London, UK, on Tuesday, July 25, 2023. Natwest is due to report first-half results on Friday, July 28. Photographer: Hollie Adams/Bloomberg via Getty Images

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NatWest reported a jump in first half profit on Friday, as it battles to contain the fallout from a clash with former Brexit party leader Nigel Farage that plunged the bank into crisis and cost CEO Alison Rose and a key lieutenant their jobs.

Britain’s biggest business bank has faced heavy criticism for mishandling the closure of Farage’s accounts with its private bank Coutts, after a dossier emerged showing a bank committee had said his views did not align with the lender’s own.

Rose stepped down on Wednesday after admitting to a “serious error of judgment” in discussing Farage’s relationship with the bank with a BBC journalist, while Coutts CEO Peter Flavel was ousted a day later.

The bank made scant reference to the incident in its earnings release on Friday, other than to confirm that its former commercial banking boss Paul Thwaite had been promoted to interim CEO for an initial period of 12 months.

NatWest reported pre-tax profit of £3.6 billion ($4.6 billion) for the period, compared to £2.6 billion the prior year and above the £3.3 billion average of analyst forecasts compiled by the bank.

The bank also announced an interim dividend of 5.5 pence per share and announced a share buyback of up to £500 million for the second half of the year.

Its shares were up 0.4% in early trading.

NatWest remains under pressure over the Farage scandal. One top-20 investor told Reuters on Thursday chairman Howard Davies’ position looked increasingly shaky, after the board backed Rose on Tuesday evening, only for her to leave hours later.

Government intervention appeared to seal Rose’s fate, after sources at the prime minister’s office and the finance ministry briefed newspapers late Tuesday evening they were not happy with her remaining in post.

NatWest is nearly 40% taxpayer-owned following its bailout during the 2008-2009 global financial crisis, adding more weight to the government’s position.

Interim CEO Thwaite will be tasked with trying to steady the ship after the damaging Farage episode, at a time when Britain faces an economic crunch from stubborn inflation and a cost-of-living crisis impacting many households.

NatWest booked a £233 million pounds charge for potential loan defaults — compared to the release of £54 million last year — and lowered its net interest margin forecast for the year to below 3.2%, with an expectation of it hitting 3.15%.

Rivals Barclays and Lloyds earlier this week set aside more cash to cover potential soured loans, while Barclays warned intensifying competition would eat into its margins.

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