NatWest tumbles to first half loss on bad loan charge

Royal Bank of Scotland CEO Alison Rose gives a speech to staff and stakeholders for the publication of the annual results at the bank's London headquarters

NatWest swings into the red after £2.9bn hit from Covid

Donald Brown, senior investment manager at Brewin Dolphin, said: "NatWest is the latest major bank to set aside billions for a likely surge in bad loans as a result of Covid-19's economic impact, with a further £2.1bn earmarked for potential bad debts - significantly higher than analysts' expectations".

The lender, which received an enormous United Kingdom state bailout at the height of the notorious global financial crisis, added that it expects to set aside between £3.5 billion and £4.5 billion for this year to cover the economic fallout from the deadly pandemic. New accounting standards mean banks must anticipate how businesses and consumers will be affected by what the Bank of England said could be the worst recession in 300 years.

NatWest remains 62% owned by United Kingdom taxpayers following its bailout in the 2008-09 financial crisis.

NatWest has been the biggest lender through the United Kingdom government's Coronavirus Business Interruption Loan Scheme, where the state guarantees 80% of the debt. The bank has also offered payment holidays on mortgages and other credit to allow borrowers struggling through the pandemic to manage their cash, in a move co-ordinated by government.

The newly-renamed bank reported a £2.1bn impairment charge for the second quarter, more than twice the size of its first quarter provision.

NatWest said in a results statement that it suffered a loss after taxation of £993 million in the three months to June compared with net profit of £1.3 billion a year earlier.

She said this was probably because during lockdown people had addressed their banking needs.

The losses come as the banking group books a £2.4 billion loan loss prevention, preparing itself for a wave of business and personal loan and mortgage defaults in the coming months.

"We are open for business", Chairman Howard Davies told reporters. "This is not like during the financial crisis ten years ago - we have a strong capital level and we can lend".

The bank's core capital buffer - a key measure of financial strength - went up to 17.2% compared to 16.6% at the end of March.

Alison Rose, NatWest's chief executive said the bank had a robust capital position, "underpinned by a resilient, capital generative and well-diversified business".

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