NatWest has slumped to a loss of £770m in the first half of the year, down from a profit of £2.7bn posted the year before.
It comes as the group set aside net impairment losses of £2.1bn in the second quarter, in a bid to cover bad debts following the pandemic.
Its total provisions have now been brought to £2.8bn, resulting in an expected credit loss (ECL) coverage ratio of 1.72% across its personal and wholesale portfolios.
The group now believes its full-year impairment charge is likely to fall between £3.5bn and £4.5bn.
Impairment charges in the second half are expected to be driven by a combination of the developing economic outlook, along with the effectiveness of government support schemes in “delaying and reducing the level of economic distress” experienced by customers, as well as the level of defaults across lending portfolios.
In its latest update, the group also noted that retail and commercial businesses income fell by 9% against the year prior, while NatWest Markets income, excluding asset disposals/strategic risk reduction, own credit adjustments and notable items, increased by 44.4%
NatWest said it has maintained “absolute and relative” capital strength despite the crisis, with a “strong” liquidity coverage ratio of 166%.
It remains “committed” to achieving a £250m cost reduction in 2020, with other expenses in the half-year period, excluding operating lease depreciation, down by £41m against the year prior.
Alison Rose, CEO, said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19. However, NatWest Group has a robust capital position, underpinned by a resilient, capital generative and well diversified business.
“Throughout this crisis we have provided exceptional levels of support to our customers, colleagues and the communities we serve. I am proud that our colleagues have consistently shown they are putting our purpose at the heart of everything they do.”
She added: “Through our strong balance sheet and prudent approach to risk, we are well placed not only to withstand Covid-19 related impacts but also to provide the right support to those who will need it most in the tough times to come.
“Our purposeful strategy will help our customers, colleagues and communities to recover, rebuild and, ultimately, to thrive. We are building a sustainable business that will generate lasting value for all our stakeholders, as we work together to create a greener, fairer and more inclusive economy.”