Analysis: NatWest Group suffers impairment losses of nearly £3bn as payment holidays reach 240,000 

NatWest Group believes the full year of 2020 impairment charge is likely to be in the range of £3.5-£4.5bn, which it attributes to a combination of the developing economic outlook and the effectiveness of government support schemes in reducing the level of economic distress.

In the first half of 2020, total income decreased by £262m, or 10.7%, when compared to the same period last year.

In personal banking, impairment losses in the first half were £657m, which increased by £476m compared to the same period in 2019. Net loans to customers increased by £12.6bn compared to the first half of 2019.

Mortgages

The 240,000 of customers that requested a mortgage holiday represents 20% of NatWest’s loan book by volume.

The report showed that as of June 30, NatWest Group has £532m mortgages in arrears, which is a small increase from December 2019, where £528m mortgages were in arrears.

Loans

According to the report, net loans to customers increased by £12.6bn as a result of gross new mortgage lending and lower redemptions.

NatWest offered the option of three-month payment deferrals on personal loans, with 72,000 customers taking up the offer. This represents 7% of the loan book.

Cards

Some £30m of card balances are in arrears, which is almost double the figure in December 2019.

Impairment provisions

NatWest’s impairment provisions as of June 2020 were £6.1bn, which represents a 64% increase on December 2019, where impairment provisions were £3.7bn.

FCA

In 2014, the Financial Conduct Authority (FCA) investigated NatWest Group’s treatment of SME customers whose relationship was managed by NatWest Group’s Global Restructuring Group (GRG) in the period 1 January 2008 to 31 December 2013. In response to the final report and update in 2016, NatWest Group announced redress steps for SME customers in the UK and the Republic of Ireland. NatWest Group’s remaining provisions in relation to these matters at June 30 2020 were £72m.