The outlook is more optimistic: the bank reports bumper profits – but the money laundering scandal casts a shadow over costs
Natwest reaped 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 946 million pounds, up from 64 million pounds at the same time last year when it was allocating billions of pounds to prepare for defaults and losses due to the Coronavirus.
But the bank, formerly known as RBS, has sounded the alarm over a money laundering scandal that is set to take the bank to court next month.
Natwest Chair Alison Rose said Britain was still “very early” in its recovery, and that the bank would reconsider its outlook for the economy when it released its semi-annual results in July.
Natwest said the criminal proceedings brought by the Financial Conduct Authority (FCA) could lead to “heavy costs”.
Bank representatives are due to appear in Westminster Court of First Instance on May 26 for a preliminary hearing.
The FCA has accused Natwest of failing to monitor the account of a client, who is understood to be a Bradford Fowler Oldfield gold dealer.
Fowler Oldfield allegedly deposited £ 365 million, including £ 264 million in cash, in “ increasingly large ” amounts between November 2011 and October 2016.
After a police raid in 2016, Fowler Oldfield was closed and liquidated. At that time, 12 people were arrested for money laundering.
“ We are very disappointed with the situation, ” said Alison Rose, chief executive, who was not responsible when the events occurred between 2011 and 2016.
“We take anti-money laundering very seriously and have invested very heavily – we have more than 4,000 people across the organization whose mission is to keep our customers safe.”
She declined to comment on whether violations of anti-money laundering rules might be more widespread.
Natwest’s first-quarter results were bolstered by the issuance of £ 102m, which was originally set aside last year to cover bad loans, as the number of customers defaulting on their debt was lower than expected.
In total, Natwest has committed £ 3.2 billion in 2020 as it prepares to hit a large number of borrowers with the coronavirus pandemic.
But its £ 102m issuance for the first three months of the year was smaller than competitors including HSBC and Lloyds Bank, as Natwest declined to revise its economic growth forecast through the summer.
Rose made it clear that Britain at present is still “ very early ” in its recovery from the Corona virus, and that Natwest will reconsider its forecast for the economy when it released its semi-annual results in July.
She added that the bank had been waiting to see what would happen as more government subsidy schemes like vacation kicked in, and customers who borrowed taxpayer-backed loans should start paying interest.
Rose said: “ As government schemes decline, you are judging whether the speed of the economic recovery is sufficient to lift those businesses that have been struggling, or whether you will see a higher level of defaults in the back end. Of the year? ‘
If Britain’s recovery continues in line with the bank’s optimistic outlook, Natwest will be able to release the £ 844 million it is holding to cover bad loans.
Although Rose was cautious about the UK’s recovery, she said there were promising signs that economic activity is starting to recover.
Households have been draining money since the pandemic began, with little spending on it – Natwest deposits rose to 451 billion pounds by the end of March, after rising 62.5 billion pounds last year and another 11 billion pounds in the first quarter of this year.
But Rose, 52, said credit and debit card transactions were starting to return to normal levels after months of weak spending.
Bank of England chief economist Andy Haldane previously said the economy is like a “wrapped spring” waiting to recover when households have a chance to get out and spend.
Natwest shares fell 3.4 percent, or 6.85 pence, to 196.65 pence.
The bank is still 59.8% owned by taxpayers after the bailout during the financial crisis.