Waving goodbye to its accident-prone reputation, the bank saw provisions for bad and doubtful debts fall from pounds 562m in 1997 to pounds 499m last year, in spite of the financial markets turmoil which resulted in an extra pounds 86m specific provision being taken to cover loans in Asia and Russia.
Derek Wanless, the NatWest chief executive, said that after 18 months of concentrating on getting the bank into shape, the businesses were now in a position where they could deliver substantial growth.
He said: "They key thing is not just the financial results but the fact that in each business we have achieved a platform going forward."
Mr Wanless said that virtually all the businesses were performing well, although further effort was needed at Greenwich NatWest, the bank's bond broking house, which is below target, and Gartmore, which lost pounds 2bn of institutional funds last year.
The five-year plan adopted in 1996 to transform the retail business was bearing fruit, with costs overall up less than 1 per cent.
The one fly in the ointment was the fact that Mr Wanless had to own up to computer glitches which will delay some of the savings for up to a year. Nevertheless, the bank is still committed to getting costs below 1997 levels by 2000, he said.
Yesterday's profit was struck after a pounds 100m provision for pensions mis- selling. That is on top of the pounds 65m taken in the previous year.
Profits from retail and commercial banking, which now accounts for 90 per cent of the group, rose by 138 per cent to pounds 1.43bn. Wealth management, which includes Gartmore, the asset management business, and Coutts, NatWest's private bank, saw profits up 157 per cent to pounds 302m.
NatWest shares rose 37p to pounds 13.06 yesterday, having briefly touched a high of pounds 13.78 earlier in the day.