NatWest's Private Banking Profit Rises In H1

Tom Burroughes

28 July 2023

The private banking arm of NatWest – – that has been engulfed in the “de-banking” saga of former UKIP leader Nigel Farage – today said its operating profit in the first half of 2023 jumped to £234 million ($299.5 million) from £187 million a year earlier, while its total income rose to £567 million from £461 million.

Today’s results announcement came a day after Peter Flavel resigned with immediate effect as Coutts chief executive, and a day before, NatWest’s CEO, Dame Alison Rose, had resigned. They left in the wake of revelations that a Coutts account had been removed from Farage because the bank had said his opinions did “not align with our values.” The episode has led to calls from Prime Minister Rishi Sunak for stronger protections of free speech in the banking world. It has also hit Coutts’ reputation. The results data today from , which runs to the period ending on 30 June, does not yet capture the potential impact of the story on the bank’s deposits, loans and inflows. After Rose resigned on Wednesday morning, shares in NatWest fell about 4 per cent.

NatWest said private banking net new money slowed to £1 billion in H1 2023 from £1.4 billion a year earlier. In the second quarter of this year, net new money was £400 million, falling from £600 million.

Private banking delivered a return on equity of 24.7 per cent, characterised by NatWest as “strong.”

The cost/income ratio of the private banking business, excluding litigation and other factors, was 54.9 per cent at the end of June, narrowing from 61.6 per cent a year earlier.

Customer deposits fell by £4.7 billion, or 11.4 per cent in the first half of the year, reflecting the impact of customer tax payments that were higher than a year earlier, as well as by increased competition for savings balances.

On 1 June, NatWest completed its purchase of a majority shareholding in Cushon, a workplace savings and pensions fintech, raising NatWest group’s total assets under management and administration by £1.9 billion.

NatWest
For the UK-listed group as a whole, in which the UK government retains a 38.6 per cent stake, NatWest said total income, excluding notable items, rose 25.2 per cent to £1.485 billion in H1 2023 from a year earlier, mainly driven by movements in the interest rate yield curve and growth in lending. Banking net interest margin stood at 3.2 per cent, rising from 2.58 per cent a year before. Customer deposit balances held stable in the second quarter after a period when they fell in the earlier quarter.

NatWest said it had a liquidity coverage ratio of 141 per cent, giving £35.3 billion of “headroom” above the 100 per cent minimum amount required. Its Common Equity Tier 1 ratio, a standard measure of a bank’s capital buffer, was 13.5 per cent, declining 70 basis points from the end of 2022, mainly caused by distributions from capital and a rise in risk-weighted assets. (The liquidity coverage ratio is the requirement whereby banks must hold an amount of high-quality liquid assets sufficient to fund cash outflows for 30 days.)

Farage story
The furore about Nigel Farage’s account, and other stories of banks removing clients without explanation, or possibly because of people’s political/cultural/religious views, as well as over being “politically exposed persons,” has caused a business and political storm. The issue is not confined to the UK, and raises questions about the proper limits on what banks do when they choose to offload clients.

Farage had called for the NatWest board, including chairman Howard Davies, to resign in the wake of revelations about the removal of his Coutts account. One particularly sensitive issue is that Alison Rose, who discussed Farage’s account with a BBC journalist – she has apologised for this – may have broken client confidentiality, which is a cornerstone of banking.