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Natwest sees profits surge by 82% as it recovers money set aside for bad loans

Natwest CEO in optimistic mood as UK makes recovery

Natwest (LON:NWG) has confirmed a dramatic increase in its profits as it joined other banks in getting back money initially allocated to covering bad loans.

The part state-owned bank said its profits before tax rose by 82% to £946m for Q1 as £102m of funds were released.

The bank also said that support given out by the government was ensuring that businesses are not defaulting on their loans.

Chief executive Alison Rose said there were “reasons for optimism” as the UK’s vaccine rollout moves along and restrictions are eased while its loan book had performed better than expected in the period.

“However, there is continuing uncertainty for our economy and for many of our customers as a result of COVID-19,” she added.

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Natwest followed the path of two of its main competitors in HSBC and Lloyds who both earned back billions set aside in case loans went bad due to the pandemic.

Natwest’s profit came a year after it fell to a £351m loss for 2020 when is set aside £3.2bn was an insurance against loans going bad.

Natwest releasing £102m amounts to a small part of this figure, mainly reflecting the bank’s commercial lending, as “support schemes continue to mitigate realised levels of default”.

The bank – formerly known as the Royal Bank of Scotland – profited from a surge in mortgage lending as there was an upturn in the housing market, with loans for new homes amounting to £9.6bn over the last quarter, up by over £8.4bn from the three month period that came before.

Retail bank customer deposits rose by 4.2% to £179.1bn since the end of 2020 as spending slumped and savings increased in lockdown.

Last month the UK Treasury announced it has finalised the sale of £1.1bn worth of shares back to Natwest. The Treasury’s stake in the British bank is now down to 59.8% from 61.7% following the third sale of its holding.

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