Newly-renamed NatWest Group became the latest in a string of British banks to report a sharp jump in provisions to deal with an expected surge in bad debts due to the worsening outlook for the UK economy.
The company, formerly known as Royal Bank of Scotland, reported a £2.1bn impairment charge for the second quarter, more than twice the size of its first quarter provision.
Government support measures since the start of the pandemic have so far kept the rate of loan defaults among consumers and businesses relatively low, but banks are preparing for a wave of difficulties in the coming months due to pessimistic growth and unemployment forecasts.
NatWest predicted that impairments would rise further in the second half of the year, albeit at a slightly slower rate. It predicted a full-year charge of between £3.5bn and £4.5bn, compared with a total of £2.9bn in the first half.
The impairment charge pushed NatWest to a £1.3bn pre-tax loss for the three months to June, compared with a £1.7bn profit in the same period last year. Revenues dropped from £4.1bn to £2.7bn, though the previous year’s numbers benefited from a series of one-off gains.
Alison Rose, NatWest chief executive, said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19. However, NatWest has a robust capital position, underpinned by a resilient, capital generative and well diversified business.”