Ulster Bank owner NatWest posts €1bn profit in three months, putting focus back on exit from Republic

NatWest -- the owner of Ulster Bank -- posted an unexpectedly large rise in group operating profit to €1bn in the quarter suggesting a rapid recovery from the Covid crisis and putting the spotlight back on its decision to close its doors in the Republic.  

However, the UK banking giant in its update made no new reference to the plans it announced in February, which will lead to the closure of 88 branches in the Republic and the loss of around 3,000 people north and south. NatWest had made the decision after a five-month review because it said it could use its capital better elsewhere. 

Its mortgage and corporate loan books of €20bn in the Republic will likely be carved up between Permanent TSB and AIB, as well as others.

NatWest is the latest British bank to reverse some Covid-19 provisions and beat earnings forecasts in the first quarter as the economy surges out of the pandemic. The UK’s biggest corporate lender posted an operating profit before tax of £946m (€1bn) for the first three months of the year, 82% higher than a year ago as mortgage demand stayed high and commercial borrowers got help from the state.

“It’s very early days. We are still coming out of the lockdown,” chief executive Alison Rose told reporters. “There are reasons for optimism with the vaccine programmes progressing at pace and restrictions being eased,” she said. 

The Edinburgh-based lender released a net £102m that was set aside to cover souring loans, defying analysts’ predictions that it would make further provisions. The move comes a day after rival Lloyds Banking Group released some of its reserves. HSBC has also started to claw back the provisions it made in the early stages of the pandemic. 

Ms Rose said the jump in profits was “a result of a good operating performance in our core franchises as well as modest impairment releases that reflect the better-than-expected performance of our loan book across the first three months of the year”.

“Defaults remain low as a result of the UK government support schemes and there are reasons for optimism with the vaccine programmes progressing at pace and restrictions being eased,” she said. 

While the banking boss warned of continued uncertainty for the UK economy and many of NatWest’s customers as a result of the ongoing crisis, she assured that NatWest was well capitalised to weather the rest of the pandemic and help customers “rebuild” in the wake of the outbreak. 

Additional reporting Bloomberg