By Greg Wright

Published 28th Jul 2023, 08:34 BST

The British bank, which has been embroiled in a row involving Nigel Farage over the closure of his bank account, reported a “strong” financial performance for the first half of the year.

Its operating pre-tax profit leaped to £3.6bn in the six months to the end of June, up from £2.6bn the same time last year.

Analysts had been expecting a lower profit of £3.3bn for the latest half-year.

Senior bosses at NatWest Group are set to face scrutiny from shareholders following the dramatic fallout in the row sparked by Nigel Farage over the closure of his Coutts bank account which is owned by the banking group. (Photo by Matt Crossick/PA Wire)

The lender, which is backed by the taxpayer, has benefited from higher interest rates, which has pushed up the cost of borrowing, and greater mortgage lending.

But the financial results come at a time of volatility for the group, with chief executive Dame Alison Rose resigning in the early hours of Wednesday after admitting to being the source of an incorrect BBC report on Mr Farage’s finances.

The boss of Coutts, the bank which shut down Mr Farage’s account and is owned by NatWest, also stepped down on Thursday.

NatWest’s chief financial officer, Katie Murray, said it was a “strong performance” for the first half of the year.

She added: “Although arrears remain low, we know that people, families and businesses are anxious about their finances and many are really struggling.

“We are being proactive in our support for those who are hardest hit, helping to build the financial resilience of the customers and communities we serve.”

But NatWest said it expects higher interest rates to be largely offset by savings rates and mortgage income reductions through the second half of the year.

It comes as UK lenders face mounting pressure to pass on higher interest rates to savers, and not just homeowners through higher mortgage rates.

The bank’s net interest margin, which shows the difference between what a bank earns from loans and pays out for deposits, shrank to 3.1 per cent in the latest quarter, from 3.3 per cent in the previous quarter.

It also saw customers moving deposits from “non-interest bearing to interest bearing balance”, which suggests savers were hunting for better deals to lock away their money in recent months. It also set aside an impairment charge of £223m to cover expected loan losses, more than quadruple the £54m put aside last year.

Richard Hunter, Head of Markets at interactive investor, commented: “NatWest has endured some banking turmoil of its own this week, but the legacy of the departing CEO is that of a performing group built on rock solid foundations.

“Total income increased by a substantial 25 per cent over the half, largely driven by strong lending growth where the retail banking unit saw further leaps in mortgage lending. The customer deposit outflows which had been seen during the first quarter, as customers sought better returns on their balances after years of a virtually interest-free environment, stabilised in the second quarter although the initial withdrawals left their mark.”

NatWest reports £1bn profit boost as bank gripped by Farage account row