A senior executive with major UK bank NatWest insists it is offering competitive saving rates but that getting the message across to some customers is a challenge under data protection rules.
On a visit to Cardiff, chief financial officer Katie Murray, who recently joined NatWest’s Cymru board, said she believes that AI could create more jobs in financial services rather than a contraction, while admitting that the bank still needs to work harder to achieve a more diverse workforce.
Banks have faced criticism for not acting quickly enough to pass on increases to the Bank of England’s base rate in the form of improved interest on customer deposits.
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Last Thursday, chief executives from Barclays, Lloyds Banking Group, NatWest and HSBC, met with regulator the Financial Conduct Authority to discuss whether there was a discrepancy, with some commentators accusing them of ‘profiteering’.
Ms Murray said that NatWest had passed on 80% of the last BoE interest rate rise onto its savers, but acknowledged that they have to do more to ensure customers understand what options on accounts are available to them.
“We have always said that when the rates were quite low, between 1% to 3%, the pass through would be quite low because, structurally, you had the banking industry struggling to make more than 5-6% return,” she said.
“It’s really important to make sure you compare apples with pears. Mortgages are two years and five years. Today, if you want to deposit your money for two years with NatWest your return will be about 5.5% to 5.8%. Your mortgage will probably be about 5.15% to 6.1%.
"If, however, you want to keep your money completely liquid and instantly accessible at all times, I'm going to reward you less for that because that money is less valuable to us.
“You've got to look at the time value of how we're trying to manage the bank's balance sheet. When you look at the last rate rise, we passed through 80% of that rate rise. We've got an additional regular saver account where people can save about £150 a month that pays out 6%. That's way above where the rate is.
“And if you're willing to put it in for slightly longer which we can see many people are, and that's not just rich people doing that, the average deposit is now in the low £10,000s, then actually we'll give you around 5.5-5.8%.”
Some banks have claimed data-protection rules have stopped them from letting certain customers know about better deals. Ms Murray said NatWest has also found it difficult to communicate with customers without breaching privacy rules.
She added: "If a customer says ‘I don’t want you to market to me or talk to me’ then it’s very difficult. One internal debate in the bank is whether informing a customer of a different interest rate is marketing or sharing information. That has been a challenge and continues to be challenging as we work our way around some of the privacy rules. It’s one thing to switch off from a clothing store, but something else to say ‘I don’t want my bank to talk to me’.”
So how are NatWest customers fairing in the current climate, particularly after the recent 5% interest rate hike?
“Overall, customers are doing well and better than we expected, but they are worried about what’s coming next,” she said.
“We can see more people and small businesses coming in to talk to us. When we look at the quality of our own book, customers are maintaining their loans and I’m not seeing a particular spike in provisions or delinquency or anything like that. What’s important to remember about the rate rise is that it doesn’t hit everybody at the same time.”
Around 66% of NatWest customers are on a five-year fixed mortgage rate and so are insulated from the immediate impact of increased interest rates. However, a third of its customers will be affected this year, and Ms Murray said the bank is working on financial health checks with those affected.
As chief financial officer, Ms Murray sits alongside chief executive Alison Rose on NatWest’s board of directors which has a 50/50 split in terms of male and female representation.
However, Ms Murray said that there was still work to do in other areas of diversity and inclusion in the workforce.
“We’ve still got further to go on growing the number of ethnic minorities in the sector and LGBT representation as well. Sir Howard Davies (NatWest chair) worked really hard to make sure we have a diverse board in terms of gender, but I don’t think we’re there yet ethnically.”
On the role AI can play in banking, Ms Murray said the bank has already adopted many AI tools into the business.
“AI is already in banking,” she said. “When you go onto your NatWest app to ask a question it's a machine that answers. Now we’re looking at how we can continue to expand on that and, as a bank, ask what’s the real opportunity of this next level of AI. We’re quite excited with what AI can deliver but it has to be controlled to make sure we’re not putting our banking data into the outside world. Instead, it’s our data being used in our world.”
She also believes that AI could create more jobs in financial services, not less. Ms Murray added: “Finance is a group of people that have always been told their jobs are about to be eliminated. I remember my head of technology telling us ‘in five years time half of you won’t be here, because I’ll replace all of your jobs’. But there are more jobs now because roles change.
“Today, we do different levels of data manipulation and have different levels of insight. So I think it’s about evolution not the elimination of jobs. That is a positive but you have to be willing to evolve.”
NatWest has regional boards across England and boards representing Wales and Scotland. Each board has a representative from NatWest’s executive committee with Ms Murray recently joining the NatWest Cymru Board.
She said: “What we've tried to do with the Welsh board is to make sure that we've got a group of people who are thinking about Wales in totality and making sure that we’re thinking about what’s the right agenda for the Welsh economy and the Welsh people. That’s what we ask the regional boards to really think about and to have much more of a presence.”
The latest NatWest PMI survey for the month of June - which measures output of the manufacturing and service sectors - showed that Wales performed the worst of the 12 monitored UK nations and regions.
The survey showed that Welsh companies were the only ones in the UK to report a fall in business activity and fail to see a rise in employment.
Ms Murray said Welsh firms were currently going through a bigger transition than other parts of the UK, as Wales moves away from receiving a large portion of European funding.
On how Wales can become attractive to outside investment, Ms Murray said: “The geography really interests me when I'm in Wales. I hear a lot of talk about north Wales and south Wales and they're quite divided. How Wales can show international investors that it is united is really important.”
Chancellor Jeremy Hunt earlier this week unveils plans to get more pension funds invested into high-growth potential UK firms and in infrastructure. The aim is to see £75bn invested by 2030. He has also agreed a deal which sees nine of the largest pension providers committing to investing 5% of retirement funds towards private investments.
It is hoped this will boost the UK economy and encourage much-needed economic growth, though some critics say the reforms could see pension funds taking on riskier investments.
Ms Murray believes the funds could do a huge amount of good as long as any risks are managed.
“If you are going to nudge pension funds and say ‘we really want you to invest in this area’, then do it slowly and sensibly and manage the risks. There are huge pension funds and insurance company funds which have the ability to really make a difference but you need to make it work for their balance sheets.”
She added: “This needs to be a slow build and, as assets and opportunities come online, making sure there are people there to fund them. If you do it all too quickly you get bubbles in valuation and then the pension funds don’t want to buy them because they’re overvalued.”
On whether the reforms will be effective at boosting UK economic growth, she said: “There's a lot of investment funds that are waiting to go into different opportunities and we know investment is really needed in the UK. As long as you can manage the risk appropriately, I would hope it would be relatively positive for the economy.”
