Outlook is rosier says NatWest boss: Bank reports bumper profits – but money laundering scandal casts cloud over costs
Natwest raked in bumper profits in the first three months of this year after fewer people defaulted on loans than expected during the pandemic.
The bank made a profit of £946million, up from £64million the same time last year when it was setting aside billions of pounds to prepare for coronavirus defaults and losses.
But the lender, formerly known as RBS, sounded the alarm bell over the money-laundering scandal which is set to drag the bank to court next month.
Natwest boss Alison Rose said Britain was still ‘very early’ into its recovery, and that the bank would reconsider its projections for the economy when it released its half-year results in July
Natwest said the criminal proceedings, which has been brought by the Financial Conduct Authority (FCA), could result in ‘substantial costs’.
Representatives of the bank are due to appear in Westminster Magistrates’ Court on May 26 for an initial hearing.
The FCA has accused Natwest of failing to monitor the account of a customer, understood to be Bradford-based gold dealership Fowler Oldfield.
Fowler Oldfield is alleged to have deposited £365million, including £264million in cash, in ‘increasingly large’ sums between November 2011 and October 2016.
After a police raid in 2016 Fowler Oldfield was shut down and liquidated. At the time, 12 people were arrested for money-laundering offences.
Chief executive Alison Rose, who was not in charge when the incidents occurred between 2011 and 2016, said: ‘We’re very disappointed with the situation.
‘We take anti money-laundering very seriously and we’ve invested very significantly – we have over 4,000 people across the organisation whose job is to keep our customers safe.’
She declined to comment on whether the breaches of anti money-laundering rules may turn out to be more widespread.
Natwest’s first-quarter results were boosted by a release of £102million, which had originally been set aside last year to cover bad loans, as fewer customers were defaulting on their debt than expected.
In total, Natwest set aside £3.2billion in 2020 as it prepared for a slew of borrowers to be hit by the coronavirus pandemic.
But its £102million release for the first three months of the year was smaller than rivals including HSBC and Lloyds Bank, as Natwest refused to revise its growth forecasts for the economy until the summer.
Rose explained that currently Britain was still ‘very early’ into its coronavirus recovery, and that Natwest would reconsider its projections for the economy when it released its half-year results in July.
She added that the bank was waiting to see what would happen as more of the Government support schemes such as furlough started to taper off, and customers who had borrowed taxpayer-backed loans had to start paying interest.
Rose said: ‘As the Government schemes taper off, you’re judging whether the speed of the economic recovery has been enough to pull those business up that were struggling, or are you going to see the level of defaults coming up at the back end of the year?’
If Britain’s bounce-back does proceed in line with the bank’s optimistic projections, Natwest will be able to release £844million that it is holding to cover bad loans.
Even though Rose was cautious on the UK’s recovery, she said there were promising signs that economic activity was beginning to pick up.
Households have been squirreling away money since the pandemic began, with little to spend it on – Natwest’s deposits were up at £451billion by the end of March, after rising £62.5billion last year and another £11billion in the first quarter of this year.
But Rose, 52, said credit and debit card transactions were beginning to return to more normal levels, after months of lacklustre spending.
Bank of England chief economist Andy Haldane has previously said the economy is like a ‘coiled spring’ waiting to rebound when households have the opportunity to get out and spend.
Natwest shares slipped 3.4 per cent, or 6.85p, to 196.65p.
The bank is still 59.8 per cent owned by the taxpayer following its bailout during the financial crisis.