NatWest-RBS deposits soar to £408bn amid lockdown

NatWest-RBS CEO Alison Rose

NatWest Group, the bank formerly known as RBS, said on Friday it suffered a net impairment loss of £2.8 billion in the first half of 2020, and said it “has guided” to a full year impairment charge of between £3.5 billion and £4.5 billion.

The group said customer deposits increased by £39.1 billion in the first half to £408.3 billion “as customers sought to retain liquidity and reduced spending as a result of government measures in relation to Covid-19.”

NatWest reported a first-half operating loss before tax of £770 million.

NatWest Group CEO Alison Rose said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19.

“However, NatWest Group has a robust capital position, underpinned by a resilient, capital generative and well diversified business …

“Through our strong balance sheet and prudent approach to risk, we are well placed not only to withstand Covid-19 related impacts but also to provide the right support to those who will need it most in the tough times to come.”

In its outlook, RBS said: “Impairment charges in the second half of 2020 will be driven by a combination of the developing economic outlook for the UK and Republic of Ireland, along with the effectiveness of government support schemes in delaying and reducing the level of economic distress experienced by our personal and commercial customers, and the absolute level of defaults across lending portfolios and associated ECL stage migration.

“We expect RWAs (risk-weighted assets) to be in the range of £185-195 billion at the end of 2020.

“Changes in RWAs in the second half of 2020 will be driven by the delivery of targeted reductions in NatWest Markets, the level of procyclical inflation driven by the economic outlook, downgrades in the credit quality and assessments in the commercial book and ongoing demand for lending from our customers.

“We continue to target a reduction in NatWest Markets RWAs to £32 billion by the end of 2020, with income disposal losses of around £0.2 billion, subject to market conditions …

“We continue to monitor events closely and assess potential scenarios and outcomes …

“The impacts of Covid-19 on the economy and the mitigating benefits of government support schemes remain uncertain and could result in changes to our financial results in upcoming periods, including the possible impairment of goodwill.

NatWest-RBS was rescued in a £45.5 billion bailout in 2008 by the UK government, which still owns 62.4% of the bank.

Shares in the bank were bought by the UK government at roughly 500p in the bailout — and shares in the group currently trade around 106p.

The bank’s chairman Howard Davies said on Friday: “We are not holding our breath in expectation of an early share sale.”