NatWest CEO Criticizes Budget's Lack of Ambition, Questions Growth Strategy

Paul Thwaite, the chief executive of NatWest, has criticized Chancellor John Healey's maiden Budget, stating it lacks the "ambition" needed for economic growth. Thwaite argued that a successful growth strategy must extend beyond merely balancing the national books.

"We want to turn some of the resilience we are seeing in the UK economy into momentum and that’s going to require greater ambition and long-term stability, whether it’s tax, spending, planning, regulation," Thwaite said, in remarks that appeared to be directed at the Chancellor. He added that these areas need to be central to a growth strategy.

Thwaite also pointed to the upcoming Spending Review and Prime Minister Andy Burnham's ten-year plan for national renewal, suggesting these initiatives would be more significant indicators of the UK's long-term economic direction than a single budget. "The UK’s growth isn’t going to be determined by one Budget or a single event," he stated.

His comments followed criticism from a senior executive at Lloyds, who described the Labour Budget's tax increase on banks as "unhelpful" for achieving growth and international competitiveness. Lloyds finance chief William Chalmers echoed this sentiment, noting that "additional taxes are unhelpful" in pursuing these economic goals.

Thwaite, however, seemed unfazed by the increase in the bank surcharge to 6 percent, a move that was lower than some had anticipated. Bank shares reportedly rose following the announcement of the windfall tax, which Healey had been expected to raise higher. When asked if banks had received favorable treatment, Thwaite responded that it would not alter NatWest's operational approach. "It doesn’t change our approach in terms of how we run the bank. We’re going to run it in the interests of all of our stakeholders. We need to be competitive for our customer and we need to deliver good returns for our shareholders."

He did acknowledge that the temporary increase in the windfall tax, set at 15 months and expected to generate £1.5 billion for the Treasury, provided "welcome clarity."

These remarks were made as NatWest reported slightly better-than-expected third-quarter results. The bank announced an operating pre-tax profit of £2.2 billion for the three months ending in September, a 2 percent increase compared to the same period the previous year. Net interest income, the difference between interest earned on loans and interest paid on deposits, rose nearly 9 percent year-on-year to approximately £3.6 billion. NatWest's performance mirrors that of other major lenders like Lloyds and Barclays, which have also seen income increases amid sustained high interest rates.

The bank highlighted its progress in streamlining operations and adopting a technology-driven model. This transition has led to the reduction of about 1,000 full-time staff in the quarter, bringing the total job losses to 1,400 for the year so far. However, the recent acquisition of wealth manager Evelyn Partners has added approximately 2,200 staff to the group's overall headcount.

NatWest reported cost savings of around £420 million, which contributed to lowering its cost-to-income ratio to 45.7 percent for the year-to-date. The bank has invested in technology, including artificial intelligence tools, with recent trials of an AI-powered spending insights helper and a fraud agent for credit card customers.

"As we help more customers to save and invest, buy a home or expand their businesses, we continue to see broad-based growth in our three customer franchises, with lending, deposits and assets under management all increasing during the quarter," Thwaite concluded.