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NatWest's impairment provisions increase by £400m

Loan impairment provisions in retail banking at NatWest increased by £400m to £1.8bn for last year, according to its full-year results.

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In 2020, NatWest granted 258,000 customers mortgage payment holidays. Looking forward, the lender’s economic outlook forecasts the unemployment rate to reach around seven percent in 2021, before beginning to steadily reduce from 2022.

 

Group-wide metrics show the bank made an operating loss of £351m for the year, but it will be paying a final dividend.

 

Alison Rose, chief executive, said: "The past year presented some extraordinary challenges for our customers, colleagues and communities. We provided exceptional levels of support to those who needed it, including the approval of over £14bn of lending under UK government schemes.

 

"Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance in a challenging operating environment. The bank continued to grow in key areas such as mortgages and commercial lending and our balance sheet remains strong, with one of the highest capital ratios amongst our UK and European peers.

 

"We made strong progress in executing the strategy we set out in February 2020 as we build a relationship bank for a digital world.”

 

The results show how NatWest fared with bad levels, with impairment losses in retail banking increasing to £792m from £393m, while total impairment provisions for the group increased by £2.4bn to £6.2bn.

 

Other expenses in retail banking decreased by £108m, reflecting the digital transformation in this part of the bank and in turn, reduced headcount. The bank also saw lower fraud costs while Covid-19 slowed down investment spend in retail banking. Litigation and conduct costs were just £19m last year.

 

Mortgage forbearance and deferrals

As at 31 December 2020, the NatWest had 16,000 active mortgage repayment holidays, representing just one percent of the book.

 

But the bank does have £1.3bn of mortgages in forbearance, of which £648m is current, £360m is between one and three months in arrears and £285m is more than three months in arrears.

 

The results refer to NatWest Group’s acquisition of a £3bn prime UK mortgage portfolio from Metro Bank on 18 December 2020. The impact of this on full-year 2020 operating profit included a £9m increase in impairment losses, but the bank said the portfolio will be "earnings accretive" within two years.

 

Around 17,000, or two percent of retail banking personal loan customers, were active on repayment holidays as at Q4 2020.

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