NatWest said it would wind down its Irish arm Ulster Bank, as Chief Executive Alison Rose continues to slash away at the state-owned lender’s underperforming parts after it swung to a loss in 2020.
The bank will exit Ireland following a strategic review, sell 4 billion euros ($4.8 billion) worth of loans to Allied Irish Banks, and discuss selling some retail assets to mortgage lender Permanent TSB, NatWest said on Friday.
NatWest reported a pre-tax loss of 351 million pounds for the year, better than an average of analyst forecasts of a 418 million pound loss as bad loans came in below expectations.
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, after cutting 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 euro loan book and 2,800 staff.
The decision follows a months-long review and sparked immediate criticism in Ireland, where the government and regulators have expressed concerns over shrinking banking competition.
Irish Finance Minister Paschal Donohoe said on Friday the banking landscape would be poorer as a result of NatWest’s decision.
NatWest’s review did not cover its Northern Irish unit, which also uses the Ulster Bank brand.
“Alison Rose is making a name for herself as a no nonsense leader, keeping the core business healthy by adding to its core business and chopping off the gangrenous limbs,” said Freetrade senior analyst Dan Lane.
“That ruthless streak will serve her well in a year that’s likely to be even harder than the last.”
NatWest shares fell 1.7% by 0830 GMT, after initially rising as much as 2.5% in early trading.
PROFIT SQUEEZE
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 government will receive 225 million pounds of the overall 364 million pound pot.
It pledged to increase shareholder returns in future years by distributing at least 800 million pounds per year from next year up until 2023.
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.
But unlike rival Barclays, which reported robust profits on Thursday, 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 pounds for 2020, below the bank’s guidance of a minimum 3.5 billion pounds.
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 1.8 million pounds, as she voluntarily gave up a quarter of her fixed share allowance, and the bank said she had also decided not to take a long-term incentive award in 2021.
