NatWest turns overseas to combat the doldrums

National Westminster Bank is investing heavily in share dealing and overseas to combat stagnant income at home. But analysts say it is a 12- month gamble - and if it does not come off, the bill will be picked up by high street customers.

Yesterday, NatWest revealed last year's profits were driven almost entirely by a halving of bad debt provisions. At the pre-tax level profits rose by 61 per cent to £1.592bn but analysts were unsettled by the bank's aggressive approach to running up costs. It is growing away from reliance on British high street banking, where it made only a third of its profits last year.

Derek Wanless, chief executive, said the bank was determined to expand its investment banking, and international and US banking arms. He said existing businesses held no promise of growth. This heavy investment forced up costs while income remained flat, so that NatWest's trading surplus, before bad debts, fell 11 per cent.

In the same period Lloyds Bank's trading surplus fell by 6 per cent. NatWest's shares yesterday fell 10p to 483p, but analysts said they would give the bank another year to see if the investment drive works.

The dividend was raised higher than expectations by 17 per cent to 21.6p. The bank's return on equity rose from 10.8 per cent to 18.7 per cent.

Rod Barrett of Goldman Sachs said that allowing the cost/income ratio to rise from 65.6 per cent to 69.2 per cent was a risky, high-profile policy.

Mr Wanless also hinted that NatWest Markets, a division that held up well in an extremely bad year, would not be averse to suitable acquisitions at the right price.

UK operations have beenorganised into six profit centres - retail, corporate, credit cards, mortgages, life assurance and general insurance - in an effort to hone the business.

Banking prospects, though, remain gloomy as much of the UK economy remains in the doldrums despite government optimism. "Those companies which are involved with exports are doing well and investing," Mr Wanless said.

NatWest, chaired by Lord Alexander, cut 6,700 jobs last year, more than any other UK bank, and trade unions put this year's planned job cuts at around 3,000.

Mr Wanless ruled out any acquisition of a UK building society, the route chosen by Lloyds Bank.

The bank prefers instead to build up NatWest Home Loans, which took 6 percent of new mortgage lending last year.

Profits at NatWest Markets, the investment banking side threatened with closure three years ago, dropped to £359m from a peak of £453m in 1993. Losses on bond dealing had been minimal, compared with appalling losses at other investment banks, NatWest said.

Dealing profits should recover on the back of a growing client base after their decline in 1994, Martin Owen, NatWest Markets chief executive, said. Total dealing profits dropped to £451m in 1994 from £508m the previous year. On the dealing front, foreign exchange profits declined most sharply to £187m from £239m in 1993.

Mr Owen cited reduced volatility in the forex markets in the second half of the year and narrowing spreads. NatWest's wholly-owned Irish unit, the Ulster Bank, is still actively pursuing a bid for Ireland's TSB Bank, according to Ronnie Kells, chief executive.

Bank chairmen: the pay and the profits

Total remuneration, including pension payments (£)

Pre-tax profit (£m)

Suggested Topics
Sport
Raheem Sterling and Luis Suarez celebrate during Liverpool's game with Norwich
football Another hurdle is out of the way for Brendan Rodgers' side
News
Portrait of Queen Elizabeth-II by David Bailey which has been released to mark her 88th birthday
peoplePortrait released to mark monarch's 88th birthday
Life & Style
The writer, Gerda Saunders, with her mother, who also suffered with dementia before her death
healthGerda Saunders on the most formidable effect of her dementia
Sport
Manchester United manager David Moyes looks on during his side's defeat to Everton
footballBaines and Mirallas score against United as Everton keep alive hopes of a top-four finish
VIDEO
News
With its new studios in Paris, Dailymotion has reinforced its position as Europe’s most-visited website
mediaEuropean rival Dailymotion certainly thinks so
Arts & Entertainment
The original design with Charles' face clearly visible, which is on display around the capital
arts + ents The ad shows Prince Charles attired for his coronation in a crown and fur mantle with his mouth covered by a criss-cross of white duct tape
Arts & Entertainment
‘Self-Portrait Worshipping Christ’ (c943-57) by St Dunstan
books How British artists perfected the art of the self-portrait
Sport
Luis Suarez celebrates after scoring in Liverpool's 3-2 win over Norwich
Football Vine shows Suarez writhing in pain before launching counter attack
News
People White House officials refuse to make comment on 275,000 signatures that want Justin Bieber's US visa revoked
News
Sir Cliff Richard is to release his hundredth album at age 72
PEOPLE
Sport
Lukas Podolski celebrates one of his two goals in Arsenal's win over Hull
football
Arts & Entertainment
Quentin Tarantino, director
film
News
The speeding train nearly hit this US politican during a lecture on rail safety
news As the saying goes, you have to practice what you preach
Sport
Mercedes Formula One driver Lewis Hamilton of Britain (front) drives ahead of Red Bull Formula One driver Daniel Ricciardo of Australia during the Chinese F1 Grand Prix at the Shanghai International circuit
sport
Arts & Entertainment
Billie Jean King, who won the women’s Wimbledon title in 1967, when the first colour pictures were broadcast
tv
News
Snow has no plans to step back or reduce his workload
mediaIt's 25 years since Jon Snow first presented Channel 4 News, and his drive shows no sign of diminishing
Life & Style
food + drinkWhat’s not to like?
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
Ben Stokes: 'Punching lockers isn't way forward'

Ben Stokes: 'Punching lockers isn't way forward'

The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
Mark Johnston: First £1 million jackpot spurs him on

Mark Johnston: First £1 million jackpot spurs him on

The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit