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The closure of the Coutts bank account of Nigel Farage, a pro-Brexit commentator and former politician, has snowballed into a political avalanche in the UK. It has already claimed the jobs of Coutts boss Peter Flavel and Alison Rose, chief executive of parent lender NatWest.
On Friday, chair Howard Davies vowed to stay on. Rishi Sunak, showing the courage natural to pragmatic politicians, has refused to back him. But it is in the interests of shareholders, including the government with a two-fifths stake, for Sir Howard to hand over to a successor in an orderly way.
The prime minister should meanwhile accelerate the selldown of the state shareholding. It is fraught with conflicts of interest, as the Farage row shows.
It is hard, for example, to know whether lower-than-expected net interest margins are solely the result of commercial pressure. Ministers have been calling for savers to get better rates.
NatWest said net interest income was 3 per cent lower than expected in the second quarter. The net interest margin fell 14 basis points to 3.13 per cent. NIM guidance for the full year is now 3.15 per cent, down from 3.2 per cent previously.
Lower NIMs partly reflect better pass-through to savers. NatWest passed on 75 per cent of rate rises in the second quarter compared to 50 per cent cumulatively.
Sir Howard may once again leave an establishment institution in a hurry, just as he left the London School of Economics in 2011 after controversy over links to Libya. His political judgment — this time in publicly backing Rose — may once again have let him down.
The government meanwhile has a hard truth of its own to acknowledge. With NIMs tightening, it has no chance of whittling down its NatWest stake at the imputed market floor price of £2.60.
State cash injections in 2008 and 2009 at around £5 were bailouts, not investments. NatWest is now a stable business. The UK should sell out faster and resume a normal relationship with NatWest.
The Lex team is interested in hearing more from readers. Please tell us whether Howard Davies should stay or go in the comments section below.
