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NatWest chair Howard Davies has vowed to continue leading the bank, in spite of pressure from shareholders, after appointing a law firm to probe the closure of Nigel Farage’s account.
The bank has been under intense scrutiny following an inaccurate report that Farage’s account at NatWest’s Coutts brand was closed for purely commercial reasons. The widening scandal has led to the chief executives of NatWest and Coutts resigning over their handling of the affair.
On Friday morning, Davies said the bank still retained the support of regulators and the UK government, its largest shareholder, and that an independent review into what happened would be conducted by law firm Travers Smith.
“The terms of reference will be available today and the findings of those linked reviews will be released in due course,” he added.
Davies said he still intended to step down as chair before July 2024, and that a search for his successor was under way, but that his departure was not imminent.
“I serve at the behest of shareholders but my intention is to continue to lead the board and ensure that the bank remains stable and able to support our 19mn customers,” he said.
His comments came as NatWest reported that revenues in the second quarter rose 20 per cent to £3.9bn, beating analysts’ expectations of £3.7bn. Pre-tax operating profits of £1.8bn were 26 per cent higher year on year, and ahead of estimates of £1.5bn.
Despite macroeconomic uncertainty, its loan loss impairments for the quarter of £153mn were significantly below the £264mn predicted by analysts. The bank also announced a £500mn buyback, and an interim dividend for 2023 of £492mn.
However, NatWest also indicated that the benefits of rising interest rates were starting to fade, as competition in the mortgage market increased and consumers moved deposits in search of higher returns.
The bank said its full-year net interest margin — the difference between the interest it charges on its loans and the rate it pays on its deposits — would be around 315 basis points, down from the 320 basis points it had said it expected.
NatWest’s clash with Farage intensified after the former Ukip leader obtained a 40-page dossier produced by the bank’s reputational risk committee, which revealed his account had been closed in part because of his political views.
NatWest chief executive Alison Rose resigned on Wednesday after admitting to inaccurately briefing a BBC journalist over the reason for the closure. Coutts’ CEO Peter Flavel stepped down on Thursday, taking “ultimate” responsibility for the bank’s treatment of the former politician.
The scandal has heaped pressure on the bank’s board, with Davies becoming the target of investor frustration after backing Rose in a statement on Tuesday evening, before quickly reversing course.
Davies said on Friday the board believed it was making a “rational decision” at the time but had changed position after the political reaction.
“Alison and I concluded, and the board supported the view, that her position was untenable, she would be running the bank in the face of very difficult headwinds, and therefore we made a different decision,” he said.
Regulators are also looking into whether any rules or laws were broken.
On Wednesday, executives from major UK banks, including NatWest, committed to upholding clients’ “freedom of expression” in a meeting with City minister Andrew Griffith. The government also wants to increase the amount of notice banks must give to customers if they intend to close their accounts.
“I have some sympathy that some greater clarity would be helpful in this,” said Davies on Friday, adding: “I reassert we do not close accounts on the basis of people’s legally held beliefs.”
NatWest shares were flat in early trading in London on Friday. Its shares are down more than 11 per cent in the year to date, following the political scandal and wider industry pressures following the collapse of Silicon Valley Bank in March.
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