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Funds News

NatWest CEO says already preparing for "hypothetical" negative rates

LONDON, Sept 22 (Reuters) - NatWest Group Chief Executive Alison Rose said she was already thinking about how to prepare the state-baked lender for negative rates, although she still believed the monetary policy remained “hypothetical” for now.

“I think the Bank of England have been clear it’s one of a number of things in their toolkit,” Rose told the Bank of America Financials conference on Tuesday.

“Clearly, if negative rates come in, that would present a further challenge to our revenue outlook on top of the recent cutting of rates,” she said.

Earlier on Tuesday, Bank of England Governor Andrew Bailey stressed that last week’s monetary policy statement was not a hint that the BoE would implement a negative Bank Rate but that the BoE needed to know how to implement it.

The Bank of Japan and the European Central Bank have cut rates below zero to deter banks from parking cash at the central banks and instead lend it out to boost growth.

With new UK lockdown measures set to be unveiled by Prime Minister Boris Johnson later on Tuesday, Rose said NatWest had been “very thoughtful and considered” about the level and nature of risk on its personal, mortgage and commercial books and the forecasting of impairments on each going forward.

The lender would continue to apply a “strong and consistent risk culture” in terms of its mortgage appetite, where demand has risen 30% since June and was “almost back to pre-COVID 19 levels”.

Only 7% of NatWest’s UK personal banking loans, which represent just over half of its total loans and advances, was unsecured, Rose said, while it has stepped up its provision coverage against credit cards to 10% from 6%.

The bank expects to report total impairments of 3.5-4.5 billion pounds ($4.48-$5.76 billion) across the full year, implying 0.6-1.6 billion pounds in additional provisions in the second half of 2020.

“That’s going to be driven by a combination of the developing economic outlook for the UK and the Republic of Ireland, along with the effectiveness of the government schemes and also any delay in underlying economic stress,” Rose said.

NWG’s strategy for Ulster Bank remained unchanged, Rose said, following media reports that the Irish unit was likely to be downsized. ($1 = 0.7812 pounds) (Reporting By Sinead Cruise; editing by Simon Jessop)

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