(Bloomberg) – NatWest Group Plc is completely rolling back measures taken at the start of the Covid-19 pandemic as the UK economy recovers, helping it beat second-quarter earnings forecasts and return money to shareholders.
The UK’s largest corporate lender posted a pre-tax operating profit of £ 1.6bn ($ 2.2bn) in the second quarter, up from a loss a year ago, as demand for mortgages remained strong and the British emerged from more than a year’s isolation.
“I definitely prefer to allocate capital to shareholders,” Chief Executive Officer Alison Rose said Friday in an interview with Bloomberg Television.
The Edinburgh lender said it would pay dividends of 3p per share and buy back shares worth up to £ 750 million after the Bank of England lifted restrictions imposed at the height of the pandemic to ensure lenders can withstand heavy losses. … NatWest said it aims to distribute a minimum of £ 1 billion per annum from 2021 to 2023 through a combination of regular and special dividends.
The bank issued £ 605 million, which was set aside to cover bad loans, which is more than analysts expected and added to the funds it issued in April. The bank set aside around £ 3.2bn last year for possible defaults as Covid-19 restrictions forced millions of borrowers to take on urgent debt or payment holidays.
Shares of NatWest, known until last year as the Royal Bank of Scotland, fell 1.3% at 8:35 am in London. The stock is up about 20% this year.
What Bloomberg Intelligence says:
NatWest’s return on equity, critical to an investment thesis, picks up steam as the lender announced £ 750million buyback plans and raised the minimum dividend by 25%, bringing the payout in 2021 to at least $ 4 billion. Fully loaded CET1, 17.5% share repurchases and dividends underscores the huge potential for further profits.
– Jonathan Tice, BI Banking Analyst
NatWest is joining rivals Barclays Plc and Lloyds Banking Group Plc this week to ease some of their preparations for the bad credit wave of the pandemic. Banks report increased demand for home loans and low depreciation rates as Brits return to work and play without restrictions.
While the lender is moving to more flexible work, Rose said there are no plans to cut the lender’s two main campuses in Edinburgh and London.
“Our offices are turning into more hybrid spaces, more flexible to operate, but there will always be a need for offices,” Rose said on Bloomberg Television. “Our presence will grow, but our two large campuses will not change.” During a separate talk about wages, she said vaccinations would not be mandatory for staff.
The UK will sell most of its £ 12.5bn ($ 17bn) stake in NatWest over the next year, potentially returning the bank to majority ownership for the first time since the financial crisis more than a decade ago.
(Adds CEO comments, stock price, analyst comment from third paragraph.)
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