NatWest bank slumps into annual loss, to exit Ireland

Britain's NatWest bank has slumped into an annual loss on coronavirus fallout, it said Friday, adding it would shut its Ulster Bank operations in Ireland, impacting around 3,000 staff.

NatWest, which last year changed its name from Royal Bank of Scotland and remains majority-owned by the UK government, reported a net loss of £753 million ($1.05 billion, 870 million euros) for 2020.

That compared with profit after tax of £3.13 billion in 2019.

The 2020 loss "reflects an impairment charge of £3.2 billion, a significant proportion of... (which) relates to potential future loan losses," NatWest said in its earnings statement.

Before impairments, NatWest made an operating profit of £2.9 billion.

The group added that despite "significant progress" at Ulster Bank in recent years, operations in "Ireland will not be in a position to achieve an acceptable level of sustainable returns."

There will therefore be a phased withdrawal over the coming years, with "minimised" job losses, but Ulster Bank will continue to operate in Northern Ireland.

Ireland's finance minister Paschal Donohoe said NatWest's move "to exit the Irish market is a very significant event."

"After 160 years serving the Irish public, today marks a sad day. Our thoughts too are with the Ulster Bank staff as they learn of the closure of the bank here in Ireland," he added in a statement.

British and Irish union officials said that around 3,000 jobs were under threat by the move.

NatWest meanwhile said it had agreed a non-binding memorandum of understanding with Allied Irish Banks for the sale of commercial loans worth around 4.0 billion euros, around one-fifth of its Ireland total.

"The winding down of Ulster bank represents the most radical change on the Irish banking landscape since the 2008 financial crisis," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"The bank has been burdened with a big book of distressed mortgage loans. It's also struggled in an era of ultra-low interest rates."

There has been no suggestion from NatWest that Brexit played any role in its exit from EU-member Ireland.

The move though is a further clear break with the past carried out by NatWest chief executive Alison Rose, who in late 2019 became the first female head of one of the big four UK banks — the others being Barclays, HSBC and Lloyds.

With Royal Bank of Scotland synonymous with the 2008 global financial crisis, Rose quickly decided to implement a name change and halve its investment banking arm.

She is also increasing the number of black staff in senior roles amid the protest movement sparked by the killing last year of African American George Floyd.

Rose has additionally put the climate high on her agenda by ending loans for coal projects by 2030.

"The past year presented some extraordinary challenges," Rose said in Friday's earnings statement.

"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," Rose added.

NatWest is also resuming its dividend after the pandemic caused it to pause the payment one year earlier.

Rose replaced Ross McEwan, who shepherded Royal Bank of Scotland through a steady recovery after its rescue during the financial crisis more than a decade ago with £45.5 billion of UK taxpayers' cash in what was the world's biggest banking bailout.

Despite its turnaround, the British government still owns more than 60 per cent of NatWest banking group.