NatWest-RBS to give billions to shareholders

NatWest-RBS CEO Alison Rose

NatWest Group plc, formerly known as RBS, said on Friday it will aim to distribute a minimum of £1 billion a year to shareholders via a combination of ordinary and special dividends from 2021 to 2023.

The bank also said it intends to start a share buy-back programme of up to £750 million in the second half of this year.

“My clear preference is to distribute capital to shareholders,” NatWest-RBS CEO Alison Rose said in a Bloomberg Television interview.

The payout news came as NatWest-RBS reported a first-half 2021 operating profit before tax of £2.5 billion compared with an operating loss before tax of £770 million in H1 of 2020.

NatWest-RBS said its net lending increased by £2.2 billion to £362.7 billion during H1 of 2021.

It said customer deposits increased by £35.5 billion during H1 to £467.2 billon “as customers sought to retain liquidity and reduced spending.”  

NatWest-RBS CEO Alison Rose said: “These results have been driven by good operating performances across the group, underpinned by a robust loan book and a strong capital position.

“Defaults remain low and, given the improved outlook, we have released a further £0.6 billion of impairment provisions in the quarter.

“While we see the potential for a more rapid recovery, we will continue to take an appropriate and conservative approach as the government schemes wind down and the economy reopens.

As a result of our strong and resilient performance, coupled with our capital strength and cautiously optimistic outlook, we are announcing an interim dividend of 3p per share and share buy-back of up to £750 million.

“We are also increasing our minimum annual distribution to shareholders to £1.0 billion for the next three years.

“Taken together, this means our total distributions for 2021 will be a minimum of £2.9 billion.”

Despite the bank moving towards more flexible working, Rose told Bloomberg there are no plans to downsize the company’s two main campuses in Edinburgh and London.

“Our offices are evolving into more hybrid spaces, more flexible working but there will always be a need for offices,” Rose said.

“Our footprint will evolve but our two big campuses are not going to change.”

Rose said on an earnings call that vaccinations would not be compulsory for staff.

On July 22, the UK Government unveiled a plan to return NatWest-RBS to majority private ownership within a year.

The UK taxpayer still owns 54.7% of NatWest-RBS after spending £45 billion to bail out the bank 13 years ago at the height of the global financial crisis at roughly £5.02 per share.

NatWest Group shares are currently trading at around £2, making further substantial losses for the taxpayer very likely.

UK Government Investments Limited (UKGI) said on July 22 it intends to sell up to “15% of the aggregate total trading volume in the company” over the duration of the plan.

That would equate to roughly £2 billion, analysts at Credit Suisse estimated.

UKGI and Her Majesty’s Treasury’s (HMT) said they will “keep other disposal options open, including by way of directed buybacks and/or accelerated bookbuilds.”

AJ Bell financial analyst Danni Hewson said: “Increased distributions to shareholders and better than expected results following up on last week’s road map to full privatisation – you’d think the market would be made up with Natwest.

“However, its latest results have been met with a shrug as investors reflect on the lack of any special dividend, the fact that the better-than-expected profit was mainly driven by the release of provisions built up as a buffer in the pandemic and the sobering reality that even if the Government sells 15% of its stake as planned and returns Natwest to private control, it will still own a chunky 40% of the business.

“By placing shares gradually over the next 12 months, the Government could put something of a ceiling on Natwest’s share price and the key net interest margin metric – basically showing how profitable its banking operations are – was also slightly disappointing as it dropped quarter-on-quarter.

“The ultimate reality is that despite rebranding as Natwest from Royal Bank of Scotland, the company is still working incredibly hard to escape the full extent of the damage wrought by the financial crisis more than a decade ago.

“Current CEO Alison Rose is just the latest person to try and lift a business which was left on its knees by its disgraced former boss Fred Goodwin in 2009.

“She has done a solid job and has steered Natwest successfully through another crisis in the form of the coronavirus pandemic.

“Will 2022 finally be the year she can start operating without one hand tied behind her back due to the majority of the bank being owned by the taxpayer?”