NatWest admits ‘serious failings’ in Nigel Farage incident; shares slide after earnings

Trading in NatWest shares was briefly suspended on Friday morning as the stock slid after a combination of lacklustre earnings and regulators flagging possible rule-breaking in a highly mediatized case.

Shares fell as much as 17% in morning trade, and were 10.7% lower at 11:14 a.m. London time — marking the steepest single-day fall for the bank since 2020, according to LSEG data.

The U.K.’s Financial Conduct Authority on Friday announced that its report into NatWest Group and its wealth management subsidiary Coutts found “potential regulatory breaches and a number of areas for improvement.”

These included the systems and controls around  how they consider account closures and customer complaints, along with the effectiveness of governance mechanisms. The report was commissioned by NatWest, which is 39% state-owned.

A scandal erupted over the summer over the closure of the Coutts account of Brexit figurehead Nigel Farage, for which the politician said the lender did not initially provide a reason. Farage filed a subject access request to obtain a dossier that the bank held on him, which addressed his political views.

NatWest CEO Alison Rose then admitted to discussing Farage’s bank account with a BBC reporter, supplying information that was used in a story and later proved to be inaccurate. She eventually resigned in July, amid heavy criticism.

The FCA said it will now further investigate the banks’ processes.

NatWest said in a statement that it had accepted and would implement all recommendations in the review. It added that it would also make its own changes to “ensure that the lawfully protected beliefs or opinions of customers do not play any role in exit, retention or onboarding decisions.”

NatWest Group Chairman Howard Davies said the report “sets out a number of serious failings in the treatment of Mr Farage.” Davies said the findings showed a “lawful basis for the exit decision” but “clear shortcomings in how it was reached as well as failures in how we communicated with him and in relation to client confidentiality.”

Separately, NatWest reported third-quarter results on Friday, posting pre-tax profit of £1.33 billion ($1.61 billion) coming in roughly in-line with analyst estimates, according to Reuters.

Its net interest margin was 2.94%, 19 basis points lower than in the second quarter, which it said was mainly because of customers switching balances from non-interest bearing current accounts to interest-bearing savings accounts.

The bank said that it expects a margin for the full-year of “greater than 3%,” following a prior forecast of “around 3.15%.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said this was a “dismal week” for NatWest, facing a “maelstrom of headwinds.”

“While NatWest is still grappling with governance issues, it’s also feeling the pressure from customers seeking much better returns on their deposits. The shrinking of its net interest margin as customers seek higher rates is a chill wind whistling through these results,” she said in emailed comments.

Longer-term cash balances jumped to 15% from 11% last quarter, Streeter said, “and this is a distinctly less profitable business than low interest current accounts.’”