Banking giant stokes independence debate as profits surge

Alison Rose declared the bank’s balance sheet would be “too big” for an independent Scotland when asked to comment on how the institution would respond if a second referendum took place.

The constitutional question has dominated campaigning for next week’s Scottish Election, amid the expectation that First Minister Nicola Sturgeon will seek a mandate from Westminster to hold a referendum if the SNP wins a majority of seats at Holyrood.

The location of the bank’s registered office was a controversial subject during campaigning for the 2014 referendum, after the institution – along with counterpart Lloyds Banking Group, owner of Bank of Scotland – declared that it would relocate to London in the event of a Yes vote.

The bank’s centre of gravity has gradually shifted to London in recent years, with Ms Rose based in the UK capital. There has been persistent speculation that the lender would switch the location of its headquarters from Edinburgh to London since it changed its name from Royal Bank of Scotland to NatWest Group at corporate level last year. Prior to the pandemic, around half of its board meetings took place in Edinburgh.

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Responding to a question from The Herald, Ms Rose, who succeeded Ross McEwan as chief executive in November 2019, said: “As you know, we are neutral on the issue of Scottish independence – it is something for the Scottish people to decide. We have been very clear, and it is recognised by senior nationalists, that in the event that there was independence in Scotland, our balance sheet would be too big for an independent Scottish economy, and so we would move our registered headquarters ... to London.”

Ms Rose insisted, however, that such a move would not affect the bank’s commitment to Scotland, where it is one of the country’s biggest private sector employers and supporters of businesses and households.

The bank currently has more than 10,000 staff based in Scotland.

Ms Rose added: “It is really just the size of the balance sheet at that point (independence), which we have been very clear in public about and with senior nationalists. The issue of Scottish independence is one for the Scottish people.”

Ms Rose’s comments were immediately seized upon by pro-union political parties. Scottish Conservatives’ finance spokesperson Murdo Fraser said: “This starkly confirms the very real consequences for Scottish jobs and business if Nicola Sturgeon ever gets her way.”

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The Scottish Liberal Democrats said Ms Rose’s comments “make clear that an independent Scotland would be less appealing for major firms to make their home here”.

However, the SNP ‘s Ivan McKee, Minister for Trade, Innovation and Public Finance, said: “As the chief executive of the NatWest Group makes clear, Scotland’s future is for the people of Scotland to decide and the bank, which is not talking about moving its operations but simply its registered address, has no view on that.

“Scotland is already one of the most attractive places in the world to do business, and the evidence clearly shows that Scotland has the talent and ambition to build a prosperous economy, drive economic recovery and raise competitiveness.”

The row came as NatWest, which is around 60 per cent-owned by UK taxpayers, beat analysts’ forecasts to report a big rise in first-quarter profits, rising to £946m from £519m last time. The results were boosted by the release of £102m of provisions for bad debts arising from the coronavirus fallout, although total income in the first quarter was 15.9% or £503m lower at £2.66bn compared with the first quarter of 2020.

Lloyds said on Wednesday that it had released nearly £459m of its provisions, citing the improved outlook and “benign” credit conditions.

NatWest set aside £3.2 billion to cover bad debts arising from Covid in its 2020 accounts.

Ms Rose said defaults remain low because of Government support schemes, notably in the commercial banking sector, and declared that the bank sees the “potential for a more rapid recovery”. But she warned uncertainty continues to shroud the economy because of Covid.

Ms Rose told reporters it would update the City on its outlook for the economy at the half-year stage, as the bank retained the guidance published with its 2020 results in February. It said then that the rollout of Covid vaccines would enable recovery through 2021, with GDP growth of around 4.5% forecast.

Ms Rose said: “We haven’t updated our economic forecasts … We do see the potential for a more positive recovery but we will update our economics at the half-year. In the quarter we haven’t seen any major losses or single name losses.”

Ms Rose said it was “too early to comment on the impact of this month’s easing of lockdown restrictions, but credit and debit card activity has already been trending towards more normal levels.” She said: “With business confidence starting to return, demand for Government support and payment holidays is declining, although new schemes have been introduced – pay as you grow, and the recovery loan scheme.

“Commercial bank lending has been more muted as businesses take a cautious approach during the ongoing uncertainty.”

Shares in NatWest Group closed down 3.4% at 196.65p.