NatWest to payout £3bn to investors as UK bank records profit

UK government set for bumper payout from NatWest

NatWest will return more than £3bn to shareholders via dividends and share buybacks over the coming years, as the FTSE 100 bank swung into the black on the back of the brightening outlook of the UK economy.

The banking giant made a £1.6bn profit before tax for the three month period to June, swinging from a £1.3bn loss for the same period a year ago, surpassing analyst forecasts.

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As a result Natwest will pay investors dividends worth £347m, valued at 3p per share.

The UK government retains a 54.7% holding in Natwest, as the bank was bailed out on the back of the 2008 financial crisis. This means that at least half of the payout will go to government coffers.

Improving economic forecasts allowed Natwest to make a profit and reduce the stack of cash it set aside in the event of loan defaults by £605m.

Analysts expected the bank to release £84m, after it had initially put aside £2.1bn two cover any potential bad debts.

Natwest, Barclays and Lloyds have now reduced the size of their reserves against bad loans by a total of £1.7bn, while HSBC, is set to report its Q2 earnings on Monday.

“These results have been driven by good operating performances across the group, underpinned by a robust loan book and a strong capital position,” the chief executive of Natwest, Alison Rose, said. “While we see the potential for a more rapid recovery, we will continue to take an appropriate and conservative approach as the government schemes wind down and the economy reopens”.

NatWest will soon be able to buy back some of the government’s shares, after the UK government said it would begin selling them on the open market.

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