NatWest Group plc

The negative outlooks on NatWest and its subsidiaries reflect residual risks from the economic impact of the COVID-19 pandemic. We view as positive NatWest's robust balance-sheet profile and the unprecedented fiscal and monetary response, and in our base case we expect its impairment charges will decline significantly in 2021. However, there remains uncertainty over the shape of the economic recovery and the implications for asset quality over our two-year outlook horizon as the U.K. government tapers fiscal support measures. We could lower the ratings if we think the operating environment could remain challenging for an extended period, with material adverse consequences for NatWest's asset quality and profitability. The likely trigger for us to consider a downgrade is a downward revision

...NatWest ranks among the leaders in the U.K.'s banking market. NatWest is one of the leading players in U.K. retail and commercial banking, which contributes the majority of its revenue and earnings. It stands to benefit as the U.K. economy recovers from the pandemic, but low interest rates will continue to weigh on its margin. The group's material impairment provisions appear sufficient to cover ultimate COVID-19 credit losses. Like other U.K. banks, NatWest incurred significant impairment charges in the first half of 2020. Actual credit losses have remained low due to fiscal and monetary intervention, but are likely to increase as the U.K. government withdraws its furlough scheme and other fiscal measures. NatWest released provisions in the first quarter of 2021, and further releases appear likely in the second quarter, when the bank will update its IFRS 9 macroeconomic assumptions. NatWest is reshaping its business model to support stronger earnings. The NatWest Markets (NWM) and Ulster...

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