NatWest CEO Cautions Against Increased Bank Taxes Amid Profit Surge

NatWest's Profit Growth Sparks Taxation Concerns

The chief executive of NatWest Group, Paul Thwaite, has issued a warning to the government regarding potential increases in bank taxes in the upcoming autumn budget. This caution comes on the heels of a reported 30.4% increase in the lender's profits, which rose to £2.18 billion in the three months ending September 30, compared to £1.67 billion during the same period last year.

Balancing Fiscal Discipline and Growth

Thwaite articulated an understanding of the challenging decisions facing Chancellor Rachel Reeves, particularly in light of a looming £30 billion shortfall in public finances. However, he emphasized the necessity for the government to balance fiscal discipline with policies that foster stability, consistency, and growth. In a conversation with journalists on Friday, Thwaite stated, “I think the government should be thoughtful about the signals it sends to investors who are looking at the UK as a long-term home for capital.”

Strong Banks Are Essential for Strong Economies

In light of NatWest's impressive profit figures, Thwaite reiterated his belief that robust economies rely on strong banking institutions. He expressed a desire to leverage the bank's capital to support customers, noting, “You can see in our numbers today, we’re providing a lot of capital to those who are buying houses or moving houses, a lot of capital to businesses.” He stressed that strong domestic banks are essential to the UK's economic backbone and that utilizing capital effectively is vital for customer support.

Positive Outlook for Future Income

The bank, which fully exited from government ownership earlier this year, has revised its full-year profitability and income forecasts upward. NatWest now anticipates an income of £16.3 billion for 2025, excluding notable items, reinforcing previous expectations that income would exceed £16 billion. Following the announcement, shares in the bank saw a 2.9% increase on Friday morning, making it one of the most significant gainers on the FTSE 100.

Tax Increase Speculation

Thwaite's remarks arrive amidst growing speculation about potential tax hikes that could affect banks, property, and landlords' rental income as the Chancellor prepares for the budget announcement on November 26. In August, major UK bank stocks faced a downturn due to concerns that the government might heed recommendations from the Institute for Public Policy Research, a think tank, suggesting the introduction of a new tax on banks. This proposed tax is intended to recover the “windfalls” that banks experienced due to the quantitative easing measures enacted following the 2008 financial crisis.

Industry Concerns and Competitive Landscape

Thwaite's sentiments align with those expressed by other leaders in the banking sector, including Lloyds CEO Charlie Nunn, who previously remarked that increased bank taxation would be inconsistent with the government's efforts to stimulate growth. The Labour Party has identified financial services as one of eight critical sectors warranting government support in its industrial strategy. At the same time, industry advocates have warned that the UK risks losing business and diminishing the competitiveness of its financial services sector compared to other global hubs like the United States.

Looking Forward

Thwaite concluded by expressing optimism regarding the Chancellor's and government's approach to the role of financial services and banks in supporting economic stability and growth. He stated, “I’ve been encouraged by what the chancellor and government have said about how they see the role of financial services and banks in helping support...”

As NatWest continues to navigate the complexities of the banking landscape, the dialogue surrounding taxation and economic support remains critical for the future of the sector.