NatWest to return £3bn to investors as UK bank swings back into profit

National Westminster Bank PLC updates

NatWest said it would return more than £3bn to shareholders through dividends and share buybacks over the next three years, as it became the latest major UK bank to report a sharp rise in profits thanks to the improved economic outlook.

The state-backed bank swung to a pre-tax profit of £1.6bn in the three months to June, from a £1.3bn loss in the same period last year and well ahead of average analyst forecasts.

The bank reversed £600m of impairments that it had taken to cover potential loan defaults at the height of the coronavirus pandemic in the first half of 2020.

Banks set aside billions of pounds to cover future losses in the first half of 2020, but government support measures such as furlough and business loan schemes have kept rates of default lower than feared.

NatWest, Lloyds and Barclays have this week reduced the size of their bad loan reserves by a total of £1.7bn. HSBC, the last of the UK’s “big four” high street banks, will report its second-quarter earnings on Monday.

Alison Rose, NatWest chief executive, said the results were also helped by “good operating performances across the group”, with revenues slightly higher and operating costs lower than forecast.

The bank announced a £347m — or 3p per share — interim dividend and a £750m share buyback that will begin this year, and said it would maintain the pace of capital returns over the next three years.

The announcement of the share buyback comes a week after the UK government said it would start selling some of its shares on the open market, meaning NatWest will be able to buy back some of the government’s stock. It had previously avoided open market buybacks despite having significant excess capital, because doing so would have increased the Treasury’s shareholding in percentage terms.

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