NatWest has reported its largest annual profit since the 2007 financial crisis.

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NatWest saw its largest yearly earnings in 2020, surpassing those of the 2007 economic downturn. This was due in part to higher interest rates. The bank also announced that Paul Thwaite, who has been the interim CEO, will officially become the chief executive before the government’s sale of its shares.

The British financial institution, which is currently 35% owned by the government, announced a 20% increase in pre-tax profits to £6.2bn for the fiscal year ending in December. This marks the highest annual profit since it earned £10bn in 2007, prior to a public bailout that is still in the process of being resolved 16 years later.

In 2023, the bank saw a significant increase in profits due to higher earnings from loans and mortgages, which exceeded the amount paid out to savers. This can be attributed to the Bank of England’s continued interest rate hikes. The bank’s net interest income, which refers to its total earnings, increased by 12% to £11 billion.

The bank’s allocation of bonuses for bankers decreased by 3%, amounting to £356 million, despite an increase in profits. NatWest explained that this was due to the effect on shareholders, as the bank did not meet its previous earnings forecast. Shareholders will receive a payout of £1 billion, including a final dividend of 11.5p per share, and will have the opportunity to participate in a share buyback scheme worth £300 million.

The financial performance will establish a strong standard for Thwaite, who was officially announced by NatWest on Friday as the new permanent CEO. Thwaite will lead the bank immediately and work alongside the incoming chairman, Richard Haythornthwaite.

Thwaite became the interim CEO after his predecessor, Alison Rose, stepped down due to a disagreement over debanking with Nigel Farage. Thwaite was previously in charge of NatWest’s business banking division.

Thwaite’s hiring will facilitate the government’s goal of offering NatWest shares to the public later this year. This decision was made by the state agency responsible for overseeing the taxpayer stake, which emphasized the importance of instilling confidence in NatWest’s leadership before proceeding with the sale.

The debanking issue began when Coutts, a private bank owned by NatWest that caters to the extremely wealthy, announced their intention to close Farage’s bank accounts. It gained momentum when Farage obtained confidential documents revealing the bank’s reservations about his political beliefs. The controversy further intensified when it was revealed that Rose, a Coutts executive, had discussed Farage’s situation with a BBC reporter.

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Rose was forced to forgo £7.6m in pay from NatWest, although independent lawyers hired by the bank concluded she had made an “an honest mistake” in speaking with the BBC and that concerns over Farage’s political views were not the driving factor in the decision to shut his accounts.

In a statement, Thwaite stated that this year, their focus is on the aspects that they can manage, such as achieving profitable growth, increasing efficiency and productivity, simplifying processes for their customers, and effectively managing costs and capital. They believe that these measures will result in long-term, sustainable benefits for their customers, shareholders, and the overall UK economy.

Source: theguardian.com

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