British bank NatWest returns to profit in 2021
LONDON (AFP) – NatWest bank said on Friday it returned to profit last year as the economy recovered from the pandemic and is expected to benefit from rising interest rates this year.
The British public lender said in a statement that net profit reached £2.95 billion in 2021, compared with a loss of £753 million a year earlier, when it made provisions of 3.2 billion pounds to cover potential fallout from the Covid-19 pandemic.
As the United Kingdom (UK) economy rebounded, the bank said it was able to release almost £1.3 billion of these provisions.
NatWest is the first of Britain’s biggest banks to publish its 2021 results.
“NatWest Group delivered a strong performance in 2021,” Chief Executive Alison Rose said.
The decision to release some of the provisions reflects “an improving economic outlook and a low level of defaults”, she said.
Last year, NatWest also cut costs by €256 million, while €3.8 billion was returned to shareholders through dividends and buyouts.
Amid heightened anxiety among Britons about the soaring cost of living as inflation rises, the bank has increased its total payout in annual staff bonuses by around 50% to £298million , slightly below its pre-pandemic level.
Rose acknowledged that UK banks stand to gain from rising borrowing costs in the UK this year.
Earlier this month, the Bank of England (BoE) raised its main interest rate for the second consecutive time in a bid to bring down inflation, which is rising faster than workers’ wages.
UK inflation hit a 30-year high of 5.5% in January, official data showed this week, adding pressure on the cost of living and on the BoE to keep raising rates.
Rising interest rates benefit savers and improve bank results.
However, they are also driving up loan repayments, which poses a major problem especially for governments that have borrowed huge sums to support economies during the pandemic.
“We are benefiting from higher interest rates,” Rose told Bloomberg television.
“This is probably the first time in 10 years that businesses and consumers have had to deal with inflation and the rising cost of living, so what we can do is provide practical support.”
Formerly known as Royal Bank of Scotland, NatWest remains just over 50% owned by the UK government after it was bailed out during the financial crisis more than a decade ago.
In late morning trading, shares of NatWest fell nearly 3% to 233.20 pence on the rising London stock market.