Digital Zeitgeist – NatWest Is On Track To Achieve Its Highest Profits Since The Global Economic Crisis Of 2008
Expected increase in bonus pool could prove controversial given cost of living crisis and government’s stake.
NatWest is about to announce its largest annual profit since the 2008 financial crisis, and there is speculation that the bank, which is backed by taxpayers, will increase the size of its bonus pool just as consumers are struggling with the cost of living crisis. NatWest’s announcement comes amid the speculation that the bank plans to do so.
When the banking group discloses its annual results on Friday, City experts anticipate that it will have reported pre-tax earnings of £5.1 billion for 2022. The banking group is still 45% state-owned.
Since it was bailed out during the financial crisis of 2008, while it was still known as Royal Bank of Scotland Group, NatWest has made strides in repairing its reputation under the leadership of Alison Rose, who serves as the company’s chief executive officer (CEO). Despite this, a further increase in its bonus pool, which grew 44% to £298 million in the previous year, is sure to rekindle controversy while many people suffer with the rising cost of living as a result of the big government investment.
The United Kingdom’s financial institutions have dramatically increased the prices of obtaining loans and mortgages as a result of a string of interest rate rises implemented by the Bank of England (which were aggravated by Liz Truss’s failed mini-budget last September).
While Rose and the chief executives of Britain’s other big high street banks have denied shortchanging savers by failing to increase interest rates on savings accounts at the same pace as the rise in the Bank base rate, analysts have said that rising income from interest charges will boost annual profits. While Rose and the chief executives of Britain’s other big high street banks have denied shortchanging savers, by failing to increase interest rates.
Net interest income is the difference between what the bank charges for loans and what it pays in interest on deposits. According to analyst projections, NatWest’s net interest income is expected to increase by 32% to £9.9 billion in 2022, up from £7.5 billion the previous year.
Last week, Rose played down the role that higher interest charges would have in her own bonus, telling MPs on the Treasury select committee that while profits were considered, “we would not be able to meet performance [targets] by … net interest margin”.
The rise in profits is likely to trigger speculation over whether the government will sell more of a stake in RBS in an effort to claw back some of the losses on the £45 billion bailout of RBS in 2008. The taxpayer stake in NatWest is still worth more than £10 billion. According to The Sunday Times, Rose may be able to announce plans to buy back shares from the government in the following month if earnings continue to climb.
In addition, it is anticipated that NatWest has set aside £434 million for the year to soften the shock of prospective defaults by customers. This is in response to the fact that the cost of living issue has increased the amount of pressure placed on consumers as well as businesses.
Money set aside for prospective defaults is also expected to weigh on the earnings of Lloyds Banking Group, which are expected to remain around the same at £6.9 billion for the year 2022. This is despite the fact that it was anticipated that the largest mortgage lender in the UK would record an almost 40% increase in net interest revenue to a total of £13 billion.
HSBC, which generates the majority of its earnings in Asia and is anticipated to post a 7% reduction to £14.5 billion ($17.5 billion) , down from £15.4 billion ($18.9 billion) in 2021, will release its full-year results on February 22, a day after Lloyds will disclose its results for the year.
According to John Cronin, a financial analyst at the brokerage Goodbody, rising interest rates will act as “tailwinds” for Britain’s biggest banks.
“However … we will see the sector book significantly higher provision charges for the fourth quarter relative to the first three quarters of 2022 in anticipation of rising loan losses through 2023,” he said.
Cronin went on to say that this was the case despite the fact that banking firms continued to report only very minor symptoms of stress on the loans books.
online sources: theguardian.com, thetimes.co.uk, goodbody.ie