By Iain Withers
LONDON (Reuters) -Britain’s NatWest would move its headquarters out of Scotland in the event of a vote in favour of independence, its CEO Alison Rose said, only days before parliamentary elections there.
State-backed NatWest, which until last year was called Royal Bank of Scotland, has been based for 294 years in the Scottish capital Edinburgh.
“In the event that there was independence for Scotland our balance sheet would be too big for an independent Scottish economy. And so we would move our registered headquarters, in the event of independence, to London,” Rose told reporters.
Investment bank Morgan Stanley this week put the chance of Scottish independence from the UK at 15%, while rival Citi put it as high as 35%, ahead of crucial elections next week where the issue will be centre stage.
“We are neutral on the issue of Scottish independence. It’s something for the Scottish people to decide,” Rose said on Thursday after NatWest reported its first quarter results.
NatWest had said ahead of Scotland’s 2014 referendum on independence that it would move its registered office to London, but Rose’s comments are her first substantive remarks on the issue since becoming CEO in 2019.
Any change in HQ address would not impact staff or customers at NatWest, which returned to profit in the first quarter after joining rivals in releasing some of the provisions it had set aside to cover expected pandemic-related bad loans.
But it warned a money laundering case could trigger a big bill after Rose’s efforts to clean up NatWest’s image hit a setback last month with criminal charges against it.
The Financial Conduct Authority alleges it failed to detect suspicious activity by a client over five years. If convicted, it could face an unlimited fine, which NatWest said could lead “to further substantial costs” and provisions.
“We’re very disappointed with the situation. We take AML (anti-money-laundering) very seriously and we invest very significantly in our services,” Rose said.
The looming court case comes as NatWest reported a pre-tax profit of 946 million pounds ($1.32 billion), almost double an average of analyst forecasts. The bank made a 519 million pound pre-tax profit in the same period last year.
Like HSBC and Lloyds, NatWest’s profits were boosted by the release of cash set aside for bad loans, but only got a modest lift of 102 million pounds.
The bank – which remains 60% taxpayer-owned following a government bailout in the 2007-09 financial crisis – slumped to a 351 million pound pre-tax loss in 2020.
Rose said unpaid loans due to the pandemic remained low and vaccine rollouts and reduced lockdowns had given “reasons for optimism” but it was too early to upgrade NatWest’s economic forecasts, striking a more cautious tone than Lloyds.
NatWest shares fell 4%, compared to a 1% rise for the FTSE 100, following its release of results.
Banks saw their finances dented by the pandemic in 2020, but domestically-focused NatWest was a relative outlier in recording an annual loss, hit particularly hard by a household spending crunch and missing the lift Barclays and HSBC got from investment banks with an international footprint.
Rose laid out plans to axe costs in February, including winding down under-performing Irish arm Ulster Bank.
NatWest bought back 1.1 billion pounds worth of stock from the government to reduce its stake from 62% last month, cutting its core capital buffer to 18.2% from 18.5%.
The bank’s deposits jumped by a further 21.6 billion pounds over the quarter as customers continued to rein in spending, while it granted 9.6 billion pounds of new mortgages amid a house buying boom.
($1 = 0.7165 pounds)
(Reporting by Iain Withers, Editing by Anna Irrera, Carmel Crimmins and Alexander Smith)