NatWest paints cautious picture for UK growth

NatWest painted a cautious outlook for 1998 as it announced pre-tax profits of pounds 1.12bn in 1996 down from pounds 1.75bn. The bank also put an end to speculation that it was in the race to bid for Scottish Amicable by saying the rising price for the mutual life insurer could not be justified.

NatWest's profits fall, widely expected by the market, was the result of a loss of pounds 719m on sale of businesses that included Bancorp, its US banking operation, costs of pounds 186m on the redesign of its UK retail banking operations and a gain of pounds 224m on the sale of its stake in 3i, the venture capital company.

Stripping out the charges, underling profits at NatWest rose by pounds 339m to pounds 1.61bn. However, its share price fell 36p to 776.5p on disappointment that it did not announce plans to return capital to shareholders as Barclays did last week.

In contrast with Barclays, which announced sharply lower profits at BZW, its investment banking arm, NatWest's investment bank produced higher pre-tax profits of pounds 462m, up from pounds 304m. But the result, included a fall in bad debt provisions to from pounds 114m to pounds 18m.

Overall, NatWest increased its general provisions against bad debts by pounds 50m and made specific provisions of pounds 499m.

Lord Alexander, chairman, said NatWest was forecasting a slower pace of economic growth in the UK next year and would therefore adopt a more cautious approach to lending.

"Interest rates have to rise. This is our scenario whichever party wins the election," Lord Alexander said.

Derek Wanless, chief executive, said this would involve a more cautious policy towards lending to small businesses and the construction and property areas. This was the time in the economic cycle - rising growth and rising consumer confidence - that banks traditionally "lost it" by increasing lending.

NatWest did not intend to fall into this trap and therefore, based on economic forecasts by David Kern, its chief economist, was preparing for a slower economic growth next year which might make it harder for businesses to repay debts.

"Their management is at odds with what is being preached by management elsewhere," said Peter Toeman, banking analyst at ANM Amro Hoare Govett. However, he said this did not mean it would not proven to be correct.

Lord Alexander said 1996 was the culmination of the re-shaping of NatWest. Its retail bank, which laid off more than 3,000 staff during the year and has plans to make a further 10,000 redundant in the years ahead, included costs of pounds 186m as it shut down more than 300 branches around the country.

The bank expects to incur a further pounds 100m of costs in retail banking this year to cover the cost of introducing new technology.

Across the entire group, the bank will spend another pounds 100m to reprogramme its computers to deal with the date problem arising from the turn of the millennium.

The bank's retail operation recently saw a deal with Tesco to offer banking from its supermarkets fall apart, and Mr Wanless said talks were being held with lawyers about seeking compensation from the supermarket chain.

At NatWest Markets, the investment banking arm, staff costs shot up from pounds 510m to pounds 726m, largely as a result of higher bonuses.

Martin Owen, chief executive of NatWest Market, said the higher figure also reflected the costs of acquisitions through the year.

Comment, page 21

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral