NatWest expects Ulster Bank withdrawal to cost €900m

UK banking giant NatWest Group said on Friday that it still expects to incur about €900 million of withdrawal expenses and losses on loan sales relating to Ulster Bank’s withdrawal from the Irish market.

The British bank said it expected about €350 million of the costs to be triggered in the third quarter as it reclassifies Ulster Bank mortgages to fair value.

In spite of these costs, NatWest reiterated that it expected the phased withdrawal to boost the parent group’s capital reserves as it would release money that had been trapped in Ulster Bank — a factor in the decision to exit the Republic in the first place.

Ulster Bank reported an operating loss of €254 million for the first half of this year from continuing operations, up from a loss of €214 million for the same period in 2021, driven by an increase in operating expenses, NatWest said in its interim results.

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Total income slid almost 49 per cent to €36 million, reflecting reduced business levels following the decision to withdraw as well as the cost of a liquidity facility from its UK parent that was put in place as part of the arrangements to manage deposit outflows. Ulster Bank started writing to customers in recent months to give six months’ notice to move deposits and current accounts to a new provider.

Meanwhile, NatWest raised its full-year guidance and made a bumper payout to shareholders after rising interest rates lifted its finances despite runaway inflation threatening to crunch the UK economy.

NatWest reported pretax profit up 13 per cent at £2.6 billion (€3.1 billion) for the six months to June 30, ahead of analyst forecasts.

A leap in lending income driven by Bank of England rate increases boosted NatWest, echoing improvements in results from rivals Lloyds Banking Group and Barclays earlier in the week.

This enabled NatWest to raise its full-year revenue forecast to about £12.5 billion, up from a previous estimate of more than £11 billion.

NatWest said it would pay an interim dividend of 3.5 pence and a special dividend with share consolidation of £1.75 billion, equivalent to 16.8 pence per share. Taken with an earlier buyback, the bank said it had paid out £3.3 billion in the first half.