THE chairman of NatWest Group has said it would have been “too difficult” for Dame Alison Rose to continue as chief executive in the face of opposition from the UK Government, as the Royal Bank of Scotland owner launched an independent review into its handling of the Nigel Farage affair.
Sir Howard Davies, who has also faced calls to resign, said ministers have not interfered in the commercial operation of the state-owned bank during his term as chairman. But he said the circumstances surrounding the Farage scandal were “highly exceptional”.
Dame Alison resigned in the early hours of Wednesday after admitting to being the source of a BBC story which reported Coutts had closed the accounts of Mr Farage for commercial reasons. It was then revealed Coutts had expressed concerns over the political views held by Mr Farage, which were disclosed in a subject access review secured by the politician.
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Dame Alison has been replaced on an interim basis by Paul Thwaite, chief executive of the bank's commercial and institutional business, for an initial 12 months. The bank announced the departure of Coutts' chief executive Peter Flavel on Thursday.
Sir Howard was grilled by reporters yesterday on the events leading to Dame Alison's resignation, and whether she will receive a pay-off, as the bank reported strong financial results for the first half of the year.
The veteran financier said the board had unanimously agreed on Tuesday that Ms Rose should remain in post after “careful assessment of the upsides and downsides”. But he said the political reaction meant her position had become “untenable”, stating: “She would be running the bank in the face of very difficult headwinds.”
Asked whether the public’s 39% stake in the bank had influenced the decision to part ways with Dame Alison, Sir Howard said: “The Government in the normal way in my eight years here has not interfered with commercial decisions in this bank, and indeed I am grateful to them for that. They have allowed us to manage the bank in a way that is in the interests of all the shareholders.”
“Clearly, these were very exceptional circumstances, and the government took a view which was not the view that the board had taken.
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“In those circumstances you have to ask yourself, is it then possible to continue in the face of that headwind. Theoretically, it would have been possible, but Alison and I concluded that it would just be too difficult. I clearly regret the way things have turned out and we have lost a great leader as a result. But I now have to look forward.”
The bank has commissioned law firm Travers Smith to carry out an independent review to examine Coutts’ decision to close Mr Farage’s accounts and the circumstances which led to the former UKIP leader’s relationship with the bank being leaked to the BBC. It will review other account closures at Coutts over the last 24 months.
Sir Howard said he had no plans to stand down immediately, saying that it had been agreed with the economic secretary Andrew Griffith that the search for his successor which began in April should continue as planned. He is due to step down in 2024, by which time he will have served as chairman for nine years.
“Like any chairman, I serve at the shareholders’ behest, but my intention is to continue to lead the board and ensure the bank remains sound, stable, and able to support our 19 million customers,” he said.
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NatWest reported an operating profit before tax of nearly £3.6 billion for the first half, compared with £2.6bn for the same period last year, as income climbed to £7.7bn from £6.2bn.
The bank’s net interest margin was 3.2% in the half versus 2.58% in the first half of 2022, underlining the boost from higher interest rates. But in the second quarter of this year its NIM fell back to 3.13% amid competitive pressure in the mortgage market and changes in its deposit mix, from non-interest bearing to interest bearing balances.
The bank now expects full-year bank NIM of around 3.15%, subject to market conditions including the assumption of a Bank of England base rate of 5.5% from the third quarter until the end of the year.
Katie Murray, chief financial officer, said in light of the ongoing economic uncertainty, including high interest rates, the bank reported an impairment charge of £223m in the first half, up from £153m in the quarter ended June 30.
But she said the bank was “well-placed to weather” the economic challenges, citing the result of the recent Bank of England stress test results, and the strength of its loan book, which she said was “well diversified and performing well”.
Ms Murray told reporters that impairments were “low” at or below pre-Covid levels, and that the bank was “not seeing any signs of material financial distress within our loan book”. However, she highlighted that customers were changing their behaviour amid the uncertainty, some by moving savings into fixed-term accounts with higher interest rates, others by managing debt by making overpayments to mortgages.
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Ms Murray said the bank remained confident of delivering full-year income of £14.8bn for 2023. And she noted the bank was proposed an interim dividend of 5.5p per share, worth £500m, as well as an on-market buyback worth up to £500m.
Mr Thwaite noted that it was an “understatement to say these are not ideal circumstances for anyone to take over”. He said: “It is clear to me we got some things wrong. It will take time to address some of those challenges, but I have already taken action and I am determined we learn and start to move forward quickly.
“It is also important to remember we have built a great business full of great people over the last few years. We have a clear strategy that is delivering well, and you can see that in the results announced this morning.”
Asked if he would like the job on a permanent basis, Mr Thwaite said: “I’ve worked at the bank for over 20 years. I am very proud to lead the bank and also very pleased that the board put their faith in me to take the bank forward.
"Having led a significant part of the business for the last four years I know it is a great business, I know it has got great people, [and] the strategy is working.
"My priority is to move forward quickly. It is day three, as you know. All I am focused on at this moment is leading the business forward out of this difficult period and supporting our customers and colleagues to take the strategy forward.”
Shares in NatWest closed up 2.3%, or 5.6p, at 245.5p.
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