NatWest Group admits 'serious failings' in Farage case

Independent review looked into the decision by NatWest subsidiary Coutts to close the account of former Ukip leader

Nigel Farage has labelled the independent review into the closure of his bank account at Coutts a 'whitewash'. EPA

An independent review into NatWest Group's decision to close the bank account of the former UK Independence Party leader, Nigel Farage, has found a number of “serious failings” in how the group, including its subsidiary Coutts, treated the politician.

The report was conducted by the law firm Travers Smith in the wake of the debanking saga, which culminated in the resignation of NatWest Group chief executive Dame Alison Rose.

“Although Travers Smith confirm the lawful basis for the exit decision, the findings set out clear shortcomings in how it was reached, as well as failures in how we communicated with him and in relation to client confidentiality,” said NatWest chairman Sir Howard Davies.

“We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect.”

A general view of Coutts bank in London, England. An independent review into the closure of Nigel Farage's account at the bank has found "serious failings". Getty Images

'Laughable'

For his part, Mr Farage dismissed the report, calling it a "whitewash."

“The report's authors claim it was 'predominantly a commercial decision' to close my accounts but, crucially, they also noted that evidence given to them by witnesses in relation to this episode was not entirely consistent," he said.

“Travers Smith has taken a very mealy-mouthed approach to this complex issue. The law firm argues that my political views 'not aligning with those of the bank' was not in itself a political decision. This is laughable.”

Meanwhile, the UK's Financial Conduct Authority said on Friday it had identified potential “regulatory breaches” in NatWest's handling of the decision to close Mr Farage's Coutts bank account.

The FCA said the Travers Smith review, as well as addition information, had highlighted a “number of areas for improvement”, including the process and systems NatWest and Coutts have for closing bank accounts, as well as the effectiveness of their governance mechanisms.

A Natwest bank branch in Woking, UK. NatWest's net interest margin has declined, prompting a fall in the group's shares on Friday. Bloomberg

Gloomy outlook

The release of the review's findings came as NatWest Group posted its third-quarter results, which showed a pre-tax profit of £1.3 billion ($1.58 billion) for the three months between July and September, up from £1.1 billion a year earlier and broadly in line with what analysts had expected.

However, NatWest's net interest margin (NIM), a key measure of lending profitability, came in at 2.94 per cent, down 0.19 percentage points as customers shifted savings from non-interest bearing savings accounts to those that paid out more.

NIM is essentially the difference between what banks charge in terms of interest rates to borrowers and the rates they offer to savers.

As a result, NatWest downgraded its margin forecast for the full year, to “greater than 3 per cent”, from a previous view of around 3.15 per cent.

For Richard Hunter, head of markets at Interactive Investor, all the major banks are experiencing this drop in their NIMs.

“The changing deposit mix has been a feature of the reporting season this far, as has the pressure on mortgage margins, which has impacted overall NIM,” he said.

There were some bright spots in NatWest's results but, overall, markets were disappointed by the NIM and the lender's shares fell by as much as 18 per cent in London.

“Deposit levels did grow, which is a positive sign that NatWest is pricing itself at the right levels to attract customers searching for higher rates,” said Matt Britzman, an equity analyst at Hargreaves Lansdown.

“That trend is plain to see, with longer-term cash balances jumping to 15 per cent of the book – compared to 11 per cent last quarter. But it is [a] less profitable business than non/low-interest current accounts.

“Add in mortgage headwinds as highly profitable business written over the pandemic rolls off, and that has caused the hit to net interest margin.”

Paul Thwaite, NatWest's interim chief executive, said “credit losses and impairments remain low and we are ready and able to stand by our customers and businesses through the current economic uncertainty”.

Mr Thwaite took the helm in July after the resignation of Ms Rose.