NatWest's profit soars on higher mortgage rates

British lender's income jumped more than a third to £5.1 billion in 2022 as interest rates increased throughout the year

The NatWest Group has announced a final dividend of 10 pence a share and an £800 million share buyback. AFP

Profits at UK lender NatWest have risen by more than a third to £5.1 billion, after a year of rising mortgage payments and interest rates.

The bank also awarded a payout of £5.25 million to its chief executive, Dame Alison Rose last year, handing out an annual bonus for the first time since it was bailed out by the British taxpayer in 2008.

At the same time, it increased the broader bonus pool for its staff by about £70 million in 2022, to a total of £367.5 million.

For some years, NatWest has been paying back the UK government for its bailout during the 2008 financial crisis and is no longer majority-owned by the state, whose stake now stands at 46 per cent.

The bank handed back £2.6 billion to the UK government throughout 2022.

Meanwhile, NatWest Group announced a final dividend of 10 pence a share and an £800 million share buyback.

Dame Alison Rose said NatWest had “delivered a strong performance in 2022”.

“We made considerable progress against our strategic goals, maintained a well-balanced loan book and distributed significant capital to our shareholders, including the UK government.”

“Despite not yet seeing significant signs of financial distress among our customers, we are acutely aware that many people and businesses are struggling right now, and that many more are worried about what the future holds.

“Our robust balance sheet, responsible lending and continued capital generation allow us to proactively support those who need it whilst helping others to get ahead of the challenges to come.”

Strong financial performance

Richard Hunter, head of markets at Interactive Investor, said NatWest had been “buoyed by an embarrassment of riches”.

“The current economic backdrop is one to which the bank is suited, being largely exposed to a UK economy where rising interest rates are in force and where bad debts remain low and containable, despite any constraints on the consumer,” he said.

“At the same time, the group’s mortgage growth remains strong, higher trading volumes have made a notable impact and any disappointments from the third-quarter update have simply been swept away.”

NatWest's net interest margin (NIM), which is essentially the difference between the rates it charges for loans and those it pays on deposits, increased significantly over the course of 2022.

In the final quarter of last year, the NIM increased by 2.1 per cent to 3.2 per cent, compared with the previous quarter.

Slightly over a week ago, Dame Alison was among the chief executives of the four big British banks to appear before the UK's Parliamentary Select Committee.

One area of concerns for the MPs on the committee was the gap between what banks charge for mortgage rates and what they give out in rates to savers.

“There’s some cynicism among my constituents that all of you as bank CEOs seem to be much better at putting up interest rates on borrowers on mortgages than giving back some money to those who are savers,” said Dame Angela Eagle, Labour MP for Wallasey, at the time.