NatWest triples profits before tax to £1.1 billion

NatWest has reported a pre-tax profit for the third quarter of £1.1bn, tripling its profits, despite setting cash aside for an expected money laundering fine.

The banking group’s results showed the pre-tax profit had grown £355m, compared with a year ago and was £677m better than the analysts forecasts.

It also released £242m from NatWest’s impairment pot – the money set aside to cover loans that could go bad last year during the pandemic.

In total the group has released £949m to date to help people through its commercial banking arm.

It has set aside £294m for litigation and conduct costs following the court case, which included provisions for an anticipated fine for breaching of the UK Money Laundering Regulations 2007 and other matters.

NatWest pleaded guilty in a hearing at Westminster Magistrates’ Court to three counts of failing to comply with anti-money laundering legislation.

The case was brought over offences relating to the Money Laundering Regulations 2007 between 2012 and 2016 in relation to the accounts of a UK-incorporated customer, which it did not adequately monitor.

The trading update also revealed that NatWest’s had experienced a 3.1% growth in lending money of £2.9bn up £7bn on the last financial year.

The group provided around £2.2bn worth of mortgages in the UK retail sector in the third quarter, due to the current demand in property following lockdowns.

It noted that credit card balances were up by 3% – a further £100,000 – and the issuance of new cards had almost doubled year on year.

It’s private banking had experienced a 11% growth for the assets under its management and administration – growing by £1bn.

NatWest will also be investing £3bn over the next three years to accelerate its digital transformation with only seven million retail customers current account being digital only.

The group experienced an increase of 13% in mobile payments in the third quarter of this year compared to the same period last year – up from 81m to 91.4m.

Chief executive Alison Rose said: “NatWest continued to deliver a strong operating performance; growing in key areas and accelerating our digital transformation to improve customer experience and make our business more efficient.

“Our robust capital position means that we have been able to buy back around £402 million of our shares, whilst also investing for growth as we support our customers and drive sustainable returns to our shareholders.

“Although we are seeing challenges in the economy and for our customers – especially around supply chains and the cost of living – a number of key indicators remain positive; growth is good, unemployment is low and there are limited signs of default across our book.”

Donald Brown, senior investment manager at Brewin Dolphin, commented: “NatWest has beaten expectations in today’s results, underlining the turnaround in fortunes for the UK’s major banks over the last 12 months on the back of a stronger UK economy.

“The bank has largely navigated the pandemic well and, with increased profits, a strong capital position, and a brighter outlook ahead, NatWest appears to be in a good place.

“All things being equal, the bank should continue on its positive trajectory, with the shares up around 45% in 2021 – notwithstanding legal costs and the government selling down its stake over the next year or so.”

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