(Adds share price)
By Iain Withers
LONDON, April 29 (Reuters) - British lender NatWest
returned to profit in the first quarter after joining rivals in
releasing some of the provisions it had set aside to cover
expected pandemic-related bad loans but warned a money
laundering case could trigger a big bill.
NatWest CEO Alison Rose's efforts to clean up NatWest's
image - including ditching the group's scandal-tainted Royal
Bank of Scotland name - hit a setback last month when regulators
launched criminal money laundering charges against it.
Prosecutors at the Financial Conduct Authority allege the
state-backed bank failed to detect suspicious activity by a
client that deposited 365 million pounds in its accounts over
five years, of which 264 million was in cash. If convicted, it
could face an unlimited fine.
NatWest said on Thursday this could lead "to further
substantial costs and the recognition of provisions". Its shares
fell 2% in early trade.
The looming court case -- an initial court date has been set
for May 26 -- comes as NatWest reported a pre-tax profit of 946
million pounds ($1.32 billion), almost double an average of
analyst forecasts. The bank made a 519 million pound pre-tax
profit in the same period last year.
Like HSBC and Lloyds, NatWest's profits
were boosted by a net impairment release, of 102 million pounds.
Analysts had forecast an extra charge of 251 million pounds.
The bank - which remains 60% taxpayer-owned following a
government bailout in the 2007-09 financial crisis - had slumped
to a 351 million pound pre-tax loss in 2020.
Rose said unpaid loans due to the pandemic remained low and
vaccine rollouts and reduced lockdowns had given "reasons for
optimism".
"However, there is continuing uncertainty for our economy
and for many of our customers as a result of COVID-19," Rose
said.
Banks across the industry saw their finances dented by the
pandemic in 2020, but NatWest was a relative outlier in falling
to an annual loss.
The domestically-focused lender's income was hit
particularly hard by a household spending crunch, while it
missed out on the boosts Barclays and HSBC got from larger
investment banks with an international footprint.
In a bid to turn things around, Rose laid out plans to axe
further costs in February, including winding down its
under-performing Irish arm Ulster Bank.
NatWest bought back 1.1 billion pounds worth of stock from
the government to reduce its stake from 62% last month, cutting
its core capital buffer to 18.2% from 18.5%.
The bank's deposits jumped by a further 21.6 billion pounds
over the quarter as customers continued to rein in spending,
while it granted 9.6 billion pounds of new mortgages amid an
ongoing housebuying boom.
($1 = 0.7165 pounds)
(Reporting by Iain Withers, Editing by Anna Irrera and Carmel
Crimmins)