Higher interest rates help NatWest make biggest yearly profit since 2007

The banking group announced the appointment of a permanent chief executive alongside its annual financial results.

NatWest Group has reported its highest yearly profit since just before the 2008 financial crisis (Matt Crossick/PA) (PA Wire)

NatWest Group has reported its highest yearly profit since just before the 2008 financial crisis, as the banking group moved to draw a line under the recent debanking row with the appointment of a permanent boss.

New chief executive Paul Thwaite said he was “focused on the things we can control”, including building profits and reducing costs.

His appointment follows the departure of former boss Dame Alison Rose, who stepped down last year after she admitted discussing former politician Nigel Farage’s bank account with a journalist.

The banking group, which also includes Royal Bank of Scotland, Coutts and Ulster Bank, unveiled better-than-expected profits for 2023.

It reported an operating pre-tax profit of £6.2 billion, above the £6 billion analysts had predicted, and a fifth higher than 2022.

It was the highest annual profit recorded since the £9.9 billion made in 2007, prior to the global financial crisis which led to the bank being bailed out by the UK Government.

Profits were boosted by the bank generating more income, which jumped by a 10th year-on-year to £14.3 billion.

However, NatWest said it had been affected by a more competitive savings rates environment, brought about by the Bank of England raising UK interest rates.

Customer deposits, excluding one-off items, fell by £13.8 billion during the year, as more customers hunted around for a better deal on their savings. But it also saw more people moving money into fixed-rate savings accounts.

The bank said it had seen a change in customer behaviour as people adapted to the higher cost of living, and for homeowners facing a jump in monthly mortgage payments.

Mr Thwaite said: “In this environment, customers are finding opportunities to boost their income and are looking to take more control of their spending.

“For instance, we have seen a 20% increase in the use of cashback sites and a more than 10% growth in spend and income from second-hand selling sites.”

This year we are focused on the things we can control: delivering profitable growth, becoming more efficient, more productive, and simpler to deal with, while managing our cost and capital efficiently

Paul Thwaite, NatWest's chief executive

NatWest’s net interest margin – which shows the difference between what a bank pays out for deposits and earns from loans – fell during the final three months of the year, compared with the previous quarter, as it paid out more to savers.

It paid a total of £5.3 billion in interest to customers in 2023, it said.

NatWest is preparing to sell its shares to ordinary investors as part of a retail offer announced by Chancellor Jeremy Hunt last year.

Mr Thwaite said that it is down to the Government to decide when and how the sale will work, but that it is a “shared ambition to return NatWest to private ownership”. The Government currently still holds about a 35% stake in the bank.

Furthermore, incoming chairman Rick Haythornwaite stressed that there was no pressure from the Government for the bank to confirm a permanent successor to Dame Alison.

However, he said “uncertainty around the CEO is never healthy for an organisation”, adding that it initiated a “rigorous and competitive” process to find the next boss.

Mr Thwaite emerged as the “outstanding candidate and the right person to shape the future of NatWest”, he said.

The new boss stepped in on a temporary basis to lead the bank in July. He was previously running its commercial business.

“It is an exciting time for our sector and our bank,” he said.

“This year we are focused on the things we can control: delivering profitable growth, becoming more efficient, more productive, and simpler to deal with, while managing our cost and capital efficiently.”

That could involve more digitisation and automation across the bank, which he said is hiring more people in data and technology while it has cut roles in areas such as operations.

He also said NatWest was keeping its branch network “under constant review”. The group announced the closure of more than 100 high street branches across the UK last year.