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Summary
- UK-based bank Natwest announced a loss of £351 million for 2020 after setting aside a bad debt provision of £3.2 billion.
- The company slashed its bonus pool for its bankers by over 33 per cent to £206 million, its lowest level since the financial crisis in 2008.
- The company, however, plans to make a dividend pay-out of £364 million and to exit the Republic of Ireland.
UK-based bank NatWest Group Plc (LON:NWG) on Friday announced an operating loss of £351 million for the financial year 2020. The loss was reported after the company set aside £3.2 billion as a bad debt cover due to an expected increase in customer defaults amid the ongoing pandemic, which resulted in an expected credit loss (ECL) coverage ratio of 1.66 per cent.
The company also slashed the bonus pool for its bankers by over 33 per cent to £206 million. The cut led to the lowest level bonus pool since it had received a bailout worth £45 billion in 2008 during the peak of the global financial crisis.
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Natwest CEO Alison Rose received a bonus of £2.6 million for the year ending 2020; however, she waived it off due to the ongoing public health crisis.
Dividend pay-outs resumed
The FTSE 100 listed bank’s loss last year was a sharp fall from its profit of £4.2 billion in 2019. Nevertheless, the company plans to make a dividend pay-out following the lifting of the central bank’s temporary ban on pay-outs in December 2020. It aims to pay out about £364 million to its shareholders. Moreover, the bank has committed an annual dividend pay-out of at least £800 million to shareholders until 2023.
The central bank ban last year had halted the company’s dividend distribution of £968 million, which also included dividends worth £600 million to the Treasury. The move was aimed at providing a buffer to banks to weather through its pandemic challenges.
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Do read: NatWest Post Profit for Q3 2020, CEO Warns of Challenging Times Ahead
Exit from the Irish market
The bank separately announced its plans to pull out of the Irish market and focus only on the UK region. It currently owns a subsidiary Ulster Bank in Ireland, which is the third largest bank in the Republic of Ireland based on some measures.
The Irish subsidiary has encountered profitability issues for some time, which led to the decision. The parent company Natwest’s CEO added that it would be done in a phased-out manner.
Ulster Bank currently employs over 2,500 people in the region and has a loan book of over EUR 20 billion (£17.2 billion) of primarily domestic loans.
Stock market reaction
The British bank’s (LON:NWG) shares were trading at GBX 173.90, up by 1.52 per cent as of 19 February at 10:46 AM GMT. Comparatively, the FTSE 100 index was trading at GBX 6,616.64, marginally down by 0.01 per cent for the same period.
