NatWest promises £364m dividend and announces Ireland withdrawal

NatWest Credit: PA Wire/PA Images

NatWest Group has told shareholders it will bring back its dividend, paying out £364 million, a year after pausing payouts as the regulator asked banks to hold on to cash for the pandemic.

The bank, formerly the Royal Bank of Scotland, announced a 3p per share dividend, the maximum allowed under new Prudential Regulation Authority guidance.

It means that the Treasury, which is still NatWest’s biggest owner after nationalising RBS during the financial crisis, will be paid around £225 million.

NatWest separately also announced plans to withdraw from the Republic of Ireland, where it runs Ulster Bank.

A review of the Irish bank found that it would not achieve an acceptable level of returns, NatWest said.

It will withdraw from the country, trying to keep job losses at a minimum, but Ulster Bank’s operations in Northern Ireland are unaffected, NatWest said.

“Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank will not be able to generate sustainable long-term returns for our shareholders,” said NatWest chief executive Alison Rose.

Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance in a challenging operating environment.

Alison Rose

“As a result, we are to begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.”

The group said that Allied Irish Banks has agreed to buy a commercial loans book worth around four billion euro (£3.5 billion) from Ulster Bank in Ireland. It will also hire the staff who work on the loans. The deal is still subject to change.

It is also in talks with Permanent TSB and some other banking businesses that are interested in buying some other assets from the Irish banking operations.

Irish finance minister Paschal Donohoe said: “After 160 years serving the Irish public, today marks a sad day. Our thoughts too are with the Ulster Bank staff as they learn of the closure of the bank here in Ireland.”

NatWest revealed that it made a pre-tax operating loss of £351 million in 2020, down from a profit of £4.2 billion a year earlier.

It came after the business took a £3.2 billion impairment charge for the year, accounting for loans it expects could fail, to a large extent because of the economic stress caused by Covid-19.

The impairment was below the £3.5 billion to £4.5 billion range that the bank had previously said it expected to report for 2020.

Total income was down 24% to £10.4 billion, the bank revealed.

Shareholders in the UK’s biggest banks were handed no dividends last year, after the Prudential Regulation Authority stepped in to ask them to preserve cash that might be needed during the pandemic.

It saved the banks around £14 billion in payouts, giving them cash to lend to businesses.

Through Government-backed schemes, UK banks have lent tens of billions to small and sizable businesses throughout the pandemic, helping many stay afloat.

Ms Rose said: “Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance in a challenging operating environment.

“The bank continued to grow in key areas such as mortgages and commercial lending and our balance sheet remains strong, with one of the highest capital ratios amongst our UK and European peers.

“We have today announced our intention to pay a final dividend whilst reaffirming our commitment to regular capital returns for shareholders in the future.”

Ms Rose and chairman Howard Davies last year accepted a 25% cut to their salaries during the pandemic, and the chief executive forewent any variable pay such as bonuses.

On a call with reporters, Mr Davies said the pair at this point had no plans to repeat this in 2021.

Donald Brown, senior investment manager at Brewin Dolphin, said: “Despite a headline loss, NatWest’s results have largely come in ahead of consensus expectations.

“Provisions for bad loans are lower than anticipated and, following on from Barclays, the resumption of the dividend will no doubt be a welcome boost for shareholders.”