Profit at NatWest Group (NWG.L), formerly Royal Bank of Scotland, was wiped out in the first half of 2020 as the banks set aside an extra £2bn ($2.6bn) to cover an expected rise in losses in the coming months.
NatWest said on Friday it made a pre-tax loss of £770m in the first half of 2020, compared to a profit of £2.6bn last year. Losses attributable to shareholders were £705m.
It came as the bank set aside a further £2bn to cover loans, credit cards, and mortgages going bad as a result of the COVID-19 crisis — far higher than the City predicted. Analysts had expected NatWest to set aside around £940m for additional loan provisions in the second quarter, although estimates varied widely.
The credit impairments take NatWest’s loss-absorbing buffers to £2.8bn. The bank initially set aside £802m to deal with the COVID-19 crisis in May.
“Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19,” chief executive Alison Rose said in a statement.
“However, NatWest Group has a robust capital position, underpinned by a resilient, capital generative and well diversified business.”
Income at the bank fell 3.75% to £3.8bn in the first half of the year of 2020 and NatWest made a profit of £2bn before impairment charges.
In the second quarter, income was flat at £1.9bn and the bank made a pre-tax loss of £1.2bn. Analysts had been expecting second quarter income of £2.4bn and a loss of £318m for the three month period.
The slump completes a trio of disappointing results from British banks this week. Barclays delivered lower than expected profits and Lloyds fell to an unexpected loss. Both were weighed down by huge provisions to cover the impact of COVID-19. Both also warned the outlook for the UK economy had worsened in recent months. HSBC is the last major bank to report first half earnings, with results due next week.