NatWest said today it will wind down its under-performing Irish arm Ulster Bank, as it swung to a full-year loss for 2020 after Covid-19 lockdowns crunched household spending.
NatWest today reported a pre-tax loss of £351m for the year, better than an average of analyst forecasts of a £418m loss. The bank had made a £4.2 billion pretax profit the prior year.
The move to sell Ulster Bank is the latest by NatWest CEO Alison Rose to strip out costs and simplify the lender since taking the helm in late 2019.
It comes after the UK lender cut back trading unit NatWest Markets and axing digital venture Bó just months after its launch.
Ulster Bank has served customers in Ireland for more than 160 years and is the country's third largest lender with a €20 billion loan book and 2,800 staff.
NatWest's review did not cover its Northern Irish unit, which also uses the Ulster Bank brand.
NatWest CEO Alison Rose said there will be no compulsory redundancies or branch closures at Ulster Bank this year.
She was speaking on a call with media after the announcement of NatWest's annual results and added that "nothing changes" with Ulster Bank today.
Ms Rose said the wind down will take a number of years to do but declined to put a specific timeframe on it.
She also said that NatWest's preference is to focus its discussion about potential loan sales on parties that will offer full banking services.
Ms Rose said the review had involved a comprehensive analysis and issues like the macroeconomic environment, the ongoing low interest rate environment and the external environment of Covid were all considerations.
Despite posting a loss, NatWest announced it would pay a dividend of 3 pence per share, after the Bank of England gave lenders the green light to resume investor payouts.
The bank remains 62% taxpayer-owned as a legacy of its state bailout in the 2007-09 financial crisis, meaning the UK government will receive £225m of the overall £364m pot.
It pledged to increase shareholder returns in future years by distributing at least £800m a year from next year up until 2023.
Alison Rose said the bank could not be certain of the long-term economic impact of the pandemic.
British banks' profits have all been squeezed by near-zero central bank interest rates and a spike in expected loan defaults due to the pandemic.
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But unlike rival Barclays, which reported robust profits yesterday, NatWest could not count on a surge in revenues at its own much smaller investment bank NatWest Markets to prop up its earnings.
Overall NatWest's impairment charges for expected bad loans came in at £3.2 billion for 2020, below the bank's guidance of a minimum £3.5 billion.
The bank maintained one of the strongest capital ratios among its peers, up to 18.3%.
Among other targets, the lender said it would aim to hit a return on tangible equity of 9-10% and reduce its other expenses by 4% a year, both by 2023.
Rose's pay was £1.8m, as she voluntarily gave up a quarter of her fixed share allowance, and the bank said she had also decided not take a long-term incentive award in 2021.
NatWest shares rose in London trade today.