LONDON (AFP) – NatWest bank said on Friday that it returned to profit last year as the economy recovered from the pandemic and stands to gain this year from rising interest rates.
The British state-owned lender said in a statement that net profit hit GBP2.95 billion in 2021, compared with a loss of GBP753 million a year earlier, when it set aside GBP3.2 billion in provisions 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 GBP1.3 billion from those provisions.
NatWest is the first of Britain’s biggest banks to publish 2021 results.
“NatWest Group delivered a strong performance in 2021,” said Chief Executive Alison Rose.
The decision to release some of the provisions reflected “an improvement in the economic outlook and a low level of defaults”, she said.
NatWest last year also cut costs by EUR256 million, while EUR3.8 billion was redistributed to shareholders via dividends and buybacks.
Amid heightened anxiety among Britons over the soaring cost of living as inflation surges, the bank increased its total payout in annual staff bonuses by around 50 per cent to GBP298 million, slightly below its pre-pandemic level.
Rose acknowledged that Britain’s banks stood to gain from rising UK borrowing costs this year.
The Bank of England (BoE) earlier this month lifted its main interest rate for the second time in a row aimed at bringing down inflation, which is rising faster than workers’ wages.
UK inflation surged to a 30-year high of 5.5 per cent in January, official data showed this week, adding pressure to the cost of living and on the BoE to keep raising rates.
Rising interest rates benefit savers and boost banks’ bottom lines.
However, they also push up loan repayments, dealing a major problem in particular for governments that borrowed vast sums to prop up economies during the pandemic.
“We do benefit from higher interest rates,” Rose told Bloomberg television.
“This is the first time probably in 10 years that both businesses and consumers have had to face inflation and rise in cost of living so what we can do is provide practical support.”
Formerly known as Royal Bank of Scotland, NatWest remains just over 50 per cent owned by the UK government after its rescue during the financial crisis more than a decade ago.
In late morning deals, NatWest shares dipped almost three per cent to 233.20 pence on the rising London stock market.