Royal Bank of Scotland owner NatWest pays out £2.1bn in dividends

The bank announced a 17% hike in interim dividend to 3.5p per share, worth £370 million, and a special dividend with share consolidation worth £1.75 billion or 16.8p per share, as rising interest rates helped first-half income and profits surge.

NatWest booked an operating profit before tax of £2.6bn for the half-year ended June 30, up from £2.3bn last year, while income soared by 21% to £6.2bn.

The pay-outs to shareholders come as households feel increasing pressure from the rising cost of living. Annual UK consumer prices index inflation increased to 9.4% in June, and is forecast to rise to 11% in the autumn. Businesses are also feeling the effects of inflationary pressures, with the cost of goods, energy and labour rocketing.

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Alison Rose, chief executive of NatWest, said the bank was aware that the rising cost of living was impacting people and businesses, with the bank anticipating that the base rate – currently 1.25% – would increase to 2% by the end of the year.

But she noted that the bank has yet to see signs of distress among customers. Ms Rose said the bank’s capital strength and generation give it the ability to support customers, and highlighted that the lender had put in place “targeted measures to support those who are likely to need it most.”

Asked by one reporter how the bank would respond to the “man in the street” who is struggling with the cost of living while it pays out bumper dividends, Ms Rose said: “We are supporting the man on the street, very clearly, and businesses. We had £9bn of lending in the first half. We are lending responsibly, making sure that we are putting capital into the economy to support businesses and families as they grow.”

The bank said it has contacted 2.7 million personal and business customers to offer advice and support on the cost of living since the start of the year, and is helping people with grants under a £4m hardship fund, which is delivered though organisations such as Citizens Advice, StepChange and Money Advice Trust.

Ms Rose said the bank is also freezing fees for SME (small and medium-sized enterprise) bank accounts.

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Asked if customers were spending less on big ticket items, or if levels of debt were rising because of the cost-of-living crisis, Ms Rose told reporters: “We are not seeing any increase in distress, or debt, or calls coming in for help and support.”

She noted the bank was seeing “strong spending still in areas like entertaining, hospitality and travel in particular” on its debit and credit cards, noting: “We are seeing spending on critical items like fuel up 20-30%. But we are not seeing an erosion of cash balances because of that. We have a predominantly secured book.

"When I look at our mortgage book, nine out of 10 of our customers won’t see an impact on their monthly payment as a result of the changing base rate because they are on fixed mortgages.”

NatWest increased lending by £9.3bn to £361.6bn, with Ms Rose noting that “we are seeing growth across all sectors”. Customer deposits grew by £14.8bn to £476.2bn.

Shares closed up 18.96p, or 8.2%, at 248.96p.

John Moore, senior investment manager at Brewin Dolphin, said: “Today’s results from NatWest show the UK’s major banks are, largely, in rude health, buoyed by rising base interest rates. An inflation-busting increase to the ordinary dividend combined with a special dividend are positive news for shareholders, as is the intention to repurchase shares from the government at a rate of up to 4.99% every 12 months.

“With the bank simplified, costs in check, and its balance sheet in a strong position, there is an argument for NatWest to do something ‘different’ with the cash at its disposal. Of course, inflation will remain a challenge, but one wouldn’t rule out a strategic acquisition in the near future.”