NatWest: pessimistic outlook smooths profits, spooks market
State support for NatWest has taken on a new meaning these days. While the UK Treasury holds just under half the shares, the Bank of England partly controls its profitability. Higher interest rates set by the central bank bolster NatWest’s net interest income (NII) which accounts for much of the bank’s top line.
Essentially, NII results from the bank earning more interest than it pays out to its customers. About 40 per cent of its accounts earn no interest. A healthy, spread income could, however, attract attention from a revenue-starved government. According to third-quarter figures reported on Friday, the year-on-year boost to NII was £771mn, an increase of 41 per cent.
Handily the bank found adjustments to reduce this out-turn. First, it decided to provision for the possibility of bad debts, though chief executive Alison Rose has said repeatedly that she sees no problems in its loan book. Mortgages make up more than half of this.
This story originally appeared on: Financial Times - Author:Tax Cognition
