© Reuters. FILE PHOTO: Signage is seen exterior a department of Ulster Financial institution in Dublin
By Iain Withers and Lawrence White
LONDON (Reuters) – NatWest stated it might wind down its Irish arm Ulster Financial institution, as Chief Govt Alison Rose continues to slash away at underperforming components of the state-owned lender after it swung to a loss in 2020.
The financial institution will exit Eire following a strategic assessment, plans to promote 4 billion euros ($4.8 billion) value of loans to Allied Irish Banks, and focus on promoting some belongings to mortgage lender Everlasting TSB, NatWest stated on Friday.
NatWest reported a pre-tax lack of 351 million kilos for the yr, higher than a mean of analyst forecasts of a 418 million pound loss as unhealthy loans got here in beneath expectations.
The transfer to promote Ulster Financial institution is the most recent by NatWest CEO Alison Rose to strip out prices and simplify the lender since taking the helm in late 2019, after slicing again buying and selling unit NatWest Markets and axing digital enterprise Bó simply months after its launch.
Ulster Financial institution has served prospects in Eire for greater than 160 years and is the nation’s third largest lender with a 20 billion euro mortgage e book and a couple of,800 employees.
The choice follows a months-long assessment and sparked quick criticism in Eire, the place the federal government and regulators have expressed considerations over shrinking banking competitors.
Irish Finance Minister Paschal Donohoe stated on Friday the banking panorama can be poorer on account of NatWest’s resolution.
“I will not say the Irish authorities welcomes this resolution, they don’t. However it’s supportive of the plans to dispose components of the enterprise to AIB and the discussions we’re having with Everlasting TSB,” NatWest chairman Howard Davies informed reporters.
Rose stated the exit – which doesn’t cowl NatWest’s Northern Irish unit – would take a variety of years and can be performed “in a really thought-about means”.
NatWest shares have been up 1% at 9.48 GMT, after initially rising as a lot as 2.5% in early buying and selling.
“Alison Rose is making a reputation for herself as a no-nonsense chief, retaining the core enterprise wholesome by including to its core enterprise and chopping off the gangrenous limbs,” stated Freetrade senior analyst Dan Lane.
“That ruthless streak will serve her effectively in a yr that is more likely to be even tougher than the final.”
Regardless of posting a loss, NatWest introduced it might pay a dividend of three pence per share, after the Financial institution of England gave lenders the inexperienced gentle to renew investor payouts.
The financial institution stays 62% taxpayer-owned as a legacy of its state bailout within the 2007-09 monetary disaster, that means the federal government will obtain 225 million kilos of the general 364 million pound pot.
It pledged to extend shareholder returns in future years by distributing at the least 800 million kilos per yr from subsequent yr up till 2023.
British banks’ earnings have all been squeezed by near-zero central financial institution rates of interest and a spike in anticipated mortgage defaults as a result of pandemic.
However not like rival Barclays (LON:), which reported strong earnings on Thursday, NatWest couldn’t depend on a surge in revenues at its personal a lot smaller funding financial institution NatWest Markets to prop up its earnings.
General, NatWest’s impairment costs for anticipated unhealthy loans got here in at 3.2 billion kilos for 2020, beneath the financial institution’s steerage of a minimal 3.5 billion kilos.
The lender has granted round 14 billion kilos of state-backed loans to struggling corporations up to now within the pandemic.
It maintained one of many strongest capital ratios amongst its friends, as much as 18.3%.
The financial institution stated by 2023 it might goal to cut back its capital buffer to 13-14%, hit a return on tangible fairness of 9-10% and scale back prices by 4% a yr.
Rose’s pay was 1.8 million kilos, after she voluntarily gave up 1 / 4 of her mounted pay for 2020.