Yahoo Finance NatWest pays £298m in bonuses as it closes 32 branches
NatWest (NWG.L) announced a swing back to profit in 2021 as the taxpayer-backed lender increased bonuses by 44% amid plans to close 32 branches.
The high street group said that it had swung to a pre-tax operating profit of £4.3bn ($5.8bn) last year from a loss of £351m in 2020.
NatWest, which is still majority-owned by the UK government, increased its bonus pool by 44% given the return to profits but plans to shut down 32 branches, mostly in England.
The bonus pool for NatWest’s bankers increased from £200m to £298m.
Alison Rose, chief executive of NatWest, said it was a “restrained bonus pool” and added that the bank was “very mindful of the challenges that our customers are facing with inflation and cost of living”.
Meanwhile, NatWest Group is set to close another 32 branches, with the lender blaming a continuing shift in customer activity towards online.
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The high street bank said 21 of the sites operated under its NatWest brand and 11 RBS branches including the one within its City of London headquarters would close.
With most employees moved to other branches, the bank said it did not expect the decision to result in many job losses, saying that only 12 were at risk.
All of the branches set to close are in England apart from RBS’s Cardiff City branch. Others include sites in Billericay in Essex, Leeds, Manchester and several in London. The bank did not say when the closures will happen.
During the year it put £1.3bn back on to its balance sheet from the £3.2bn put aside during the pandemic, reversing its provisions for bad loans.
Shareholders will benefit, with NatWest proposing a final dividend for 2021 of 7.5p, more than double last year’s 3p, which will result in £844m being returned to shareholders.
It has also announced a share buyback of £750m, which is another way of returning cash to shareholders.
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Net mortgage lending across the business jumped by £10.8bn in 2021, with NatWest reporting “strong gross new mortgage lending and improved retention”.
Analysts warn that the bank has depended a lot on its mortgage business, and with signs that home buying is slowing down, the bank may not be able to rely on that income for much longer.
“NatWest’s tone is one of reserved optimism, despite ongoing uncertainty,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
“Lending levels and therefore net interest margins are being buoyed by heightened mortgage demand.”
NatWest’s shares dropped 3% despite its return to profit, with the bank standing as the top faller on the FTSE 100 (^FTSE) on Friday.
The lender reduced its annual cost-cutting target to 3% from 4% for each of the next two years, citing inflation pressures and reinvestment
Customer deposits also rose during the year, up by £17.1bn or 10% across its retail banking.
"We're really aware the challenges are to come for a lot of customers," Rose told reporters, adding that there had not yet been any increase in calls to the bank's helplines from people struggling to pay their bills.
She said: "People are phoning up and talking about it, but we're not seeing any concerns coming through in our data as yet.
“We’re really focused on making sure we’re putting in practical help for customers because I think if you look at rising inflation and the cost of living, it is a challenge that business owners and families have not really faced in the last 10 years.
“There are no signs of stress at the moment but we have specialist teams in place to train to deal with this.”
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Richard Hunter, head of markets at Interactive Investor, said: “There are certainly plans for this excess. Paying down a government stake which currently stands at 53% is a painful but necessary drain on capital, but it is also one which the bank is comfortably able to afford.
“Indeed, the announcement of a further share buyback programme totalling £750m is further proof that NatWest intends to deploy excess monies where possible in shareholder returns.”
“Along these lines, the increase of the final dividend to 7.5p now implies a yield of 4.4%, which is not only punchy given the interest rate backdrop, but also significantly marks a return to the level being paid pre-pandemic.”
The lender has been majority-owned by the taxpayer following a bailout by the government in a £45.5bn rescue deal during the 2008 financial crisis.
The taxpayer stake in the bank formerly known as Royal Bank of Scotland has reduced to just under 51%, and is expected to move below 50% in the coming months.
