NatWest’s latest results show an operating pre-tax profit of £4bn in 2021, up from an operating pre-tax loss of £481m a year earlier.
Net mortgage lending across the business jumped by £10.8bn in 2021, with NatWest reporting “strong gross new mortgage lending and improved retention”.
However, total income was flat compared to last year, at £10.5bn, as net interest income rose 1.8%.
That offset a decline in non-interest income, largely because of lower trading income.
The release of provisions put aside in case customers defaulted on their loans helped with the surge in pre-tax profit to £4.0bn.
The results follow a year where Natwest was fined £264.8m in the year, relating to its failure to adequately monitor an account used for money laundering.
The bank also said it had increased its bonus pool to £298m, a 44% increase on a year earlier.
For the new financial year the group expects “to achieve a return on tangible equity of comfortably above 10%”.
Alison Rose, chief executive of the NatWest, said: “We are acutely aware of the challenges that many people, families and businesses continue to face up and down the country and are working alongside our customers to provide the support they need – whether that is managing their money better, saving for a house or retirement, or starting or growing a new business – as well as playing a leading role in the transition to net zero.”
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Natwest’s tone is one of reserved optimism, despite ongoing uncertainty.
“Lending levels and therefore net interest margins are being buoyed by heightened mortgage demand. While the fundamentals of the UK housing market remain intact, we may well have passed the peak of demand meaning other areas are going to have to pick up the slack.
“Given the disappointing results from the group’s non-interest related income, its ability to do this in the short term has been called into question.
“Shareholders have been rewarded for their patience through the uncertainty of the last couple of years, with a £750m buyback announced. That is no doubt a sweetener, but it’s done little to relieve the market. It’s likely investors are expecting even more from banks, thanks to the helpful backdrop of rising interest rates, and given Natwest is arguably over-capitalised, it’s hard to disagree.
“One area the bank isn’t being accused of under-spending is the bonus pot, which may well be a bug bear in the public domain, but the harsh truth of the matter is this does little to move the dial.”
Shares fell 2.0% following the results.
