NatWest 'completely prepared' for no deal Brexit

·Senior City Correspondent, Yahoo Finance UK
·2-min read
Royal Bank of Scotland CEO Alison Rose gives a speech to staff and stakeholders for the publication of the annual results at the bank's London headquarters. (Photo by Nick Ansell/PA Images via Getty Images)
NatWest CEO Alison Rose gives a speech to staff and stakeholders for the publication of the annual results at the bank's London headquarters. Photo: Nick Ansell/PA Images via Getty Images

NatWest (NWG.L) CEO Alison Rose said the major British lender is “completely prepared” for a possible no deal Brexit at the end of 2020.

“We have planned operationally for a hard Brexit,” Rose told journalists on a call on Friday. “Operational, we’re completely ready.”

While the bank is prepared, NatWest thinks a no deal Brexit would lead to more economic damage to the UK and could force the bank to set aside billions more to cover losses.

READ MORE: NatWest makes loss as it more than triples COVID-19 buffers

NatWest laid our four economic models for the UK as part of its half-year results on Friday. The models include two central scenarios as well as “upside” and “downside” forecasts.

“All of them include some level of Brexit,” chief financial officer Katie Murray said. “If you look to what would be a disorderly Brexit, you’re probably getting into a downside scenario.”

NatWest’s downside scenario sees UK GDP fall by 17% in 2020 and unemployment jump above 14%.

Murray said NatWest saw only a 10% likelihood of this scenario coming to pass but said: “If [Brexit] was very disorderly, that’s where you’d get to.”

NatWest said on Friday would likely set aside up to £4.5bn ($5.9bn) this year to cover an expected spike in bad loans. But the bank warned it could need to add £1.9bn to the pile if its downside model comes to pass.

READ MORE: EU's Brexit negotiator says trade deal 'unlikely' by year end

The Brexit transition period between the EU and UK end on 31 December 2020. Negotiators have just weeks to agree a trade deal to avoid trade reverting to World Trade Organisation (WTO) terms. European Union chief negotiator Michel Barnier said recently a deal looked “unlikely,” with significant differences remaining between the two sides.

Economists at Bank of America said on Friday a no deal Brexit or a “skinny” trade deal were now the only two likely outcomes.

“Both options would cut UK GDP 5-10% in the long-run in our view, with major short-run disruption especially in the no deal case,” the investment bank’s economists wrote.

Rose and Murray’s comments came as NatWest reported worse-than-expected results. The bank fell to a half-year loss as it set aside £2bn to cover an expected surge in bad debts.

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