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NatWest beats profit expectations after dipping into rainy day fund

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NatWest smashed expectations in the first half of the year as it withdrew cash that had been set aside for a rainy day and hiked shareholder payouts.

The bank said that operating profit before tax reached more than £2.5 billion in the six months, a swing from a £707 million loss in the same period last year.

It makes NatWest the latest bank to beat forecasts, following on from both Barclays and Lloyds earlier this week.

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Analysts had expected NatWest to show profits of around £1.8 billion in the half.

Their estimates were close, apart from one vital component.

Along with Lloyds and Barclays, NatWest set aside billions of pounds during the early days of Covid-19, in case it was needed during the ensuing economic chaos.

But the economy today looks better than it did then, allowing all three banks to dip back into these so-called impairment charges from last year.

NatWest decided to release £705 million from its impairment pot, most of which – £605 million – came in the second quarter of the year.

Chief executive 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.”

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The business said it will pay an interim dividend of 3p per share, returning £347 million to shareholders that way.

The Government, which took a stake in the group during the 2008 financial crisis, will receive £190 million of this.

NatWest will also buy back shares worth up to £750 million from its investors.

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