Boss Rose defends £300m bonus pool at Royal Bank owner

As UK households face a growing cost of living crisis, the new annual report for the state-owned bank, published yesterday, also showed that chief executive Alison Rose saw her total pay rise by £1m to £3.6m in 2021 – a year that saw the lender return to profit as the economy continued to recover from the pandemic.

NatWest made an operating profit of £4.3billion, following a loss of £351m the year before, as it was boosted by strong mortgage growth and a low level of loan defaults. Its annual results were published in a week that saw the bank swing the axe on branches, with a further 32 to close south of the Border.

Details of the increased bonus pool at NatWest came as UK households face the prospect of annual consumer prices inflation surging to 7.25% in spring, having climbed to 5.5% in January from 5.4% in December.

Ms Rose said yesterday that the bank was “acutely aware of the challenges” people and businesses face, and stood ready to provide support through services such as financial health checks. But she said the bank is “not seeing any sign of distress” on its book yet. The bank recorded a net impairment release of £1.3bn, reflecting the low levels of loan defaults it has seen.

Ms Rose said: “We are seeing really good customer resilience to date; strong employment numbers, low levels of default. We are not seeing a rise in the number of customers needing specialist help at this time. But what we are very mindful of is the challenges that may be coming.”

Commenting on the 2021 bonus pool, which the bank said was “significantly reduced” in 2020 to reflect the impact of Covid, and was 3% lower than in 2019, Ms Rose said “we showed significant restraint if you compare us across the industry”. She noted: “It does reflect a strong performance. If you look at our pool it is down on the pre-Covid 2019 pool. So it is balance. As you know, a large majority of our staff are not on bonuses, including our executive team. We try and balance that in terms of recognising how the market works.”

The £3.6m package paid to Ms Rose includes a base salary of £1.1m, a fixed share allowance of £1.1m, and a long-term incentive award of nearly £1.2m. Chairman Sir Howard Davies said of the bonuses paid by NatWest: “We are aiming to be competitive in the range, but we are not aiming for the top of the range.”

NatWest’s results came shortly after the bank this week cited the continuing shift to online and digital banking as it said it would close 31 branches in England and one in Cardiff, Wales. The bank said yesterday that 60% of active current account customers now exclusively bank with NatWest using its digital channels. Asked if the bank would rule out further cuts, Ms Rose replied that branches remained important to the lender, but said decisions would be driven by customer behaviour, which she said was changing.

The stake now held by UK taxpayers in the bank has now dipped below 51% following recent share ales, raising expectations that its long period of being majority owned by the government will soon end. Ms Rose said it is “very much for the government” to decide when to sell down its stake.

A final dividend of 7.5p was proposed and the bank said it would start a £750m share buyback in the first half of the year. That would take to £3.8bn the capital returned to shareholders through dividends and buybacks, including £1.7bn to UK taxpayers.

Ms Rose said the recent rises in interest rates phased in by the Bank of England to tackle inflation will benefit the institution.

Zoe Gillespie at Brewin Dolphin said: “NatWest has beaten expectations again and looks set to continue on its positive trajectory. The net impairment release of nearly £1.3 billion, bumper profits, and strong capital reserves point to a bank in good health.”

Shares ended the down 2.5%, or 5.9p, 234.4p.

“The increased dividend and share buyback programme suggest NatWest’s management team are optimistic about the year ahead, while rising interest rates should only benefit its core business. NatWest is now much more attractive as an investment prospect, notwithstanding the likelihood of the government winding down its substantial stake in the bank.”

Meanwhile, Sir Howard dismissed reports that he was set to leave the group, declaring: “Reports of my death have been much exaggerated!”.

Sir Howard, who has been chairman for six and a half years, said there “no plans for me to leave at present”. He said he remains “focused on the job… bearing in mind that in the end I do have a nine-year limit” that he will reach in July 2024, referring to the maximum statutory period board members are allowed to serve under corporate governance rules.