NatWest tumbled into the red by £1.3bn in the second quarter as it stashed away another £2.1bn to cover bad debts caused by the coronavirus crisis. Preparations for a further downturn wiped out profits at the taxpayer-owned lender – formerly known as Royal Bank of Scotland – which reported a £1.7bn profit during the same period last year. Earnings were hit by a £2.1bn loan loss provision to cover a jump in defaults in the coming months, as businesses and households struggle to repay their debts because of the economic slump triggered by the pandemic. Analysts had expected a second-quarter charge of £943m. NatWest Group’s chairman, Howard Davies, said: “It’s always disappointing to report a loss but as you’ve seen from the banks that have already reported, our first-half numbers show the impact the pandemic is having on our profitability.” NatWest said the impairment costs – which brings total provisions so far this year to £2.9bn – “reflected the deterioration of the economic outlook”. Full-year loan loss charges are expected to total £3.5bn-£4.5bn. The bank’s worst-case scenario forecasts predict a 16.9% drop in gross domestic product for 2020, with unemployment peaking at 14.4% in the fourth quarter of this year. However, its central forecasts are for an economic decline of about 14% this year, with the jobless rate hitting 9.2%-9.8% in the final three months of 2020. The lender warned it could be forced to take a writedown if the economic blow was larger than expected: “The impacts of Covid-19 on the economy and the mitigating benefits of government support schemes remain uncertain and could result in changes to our financial results in upcoming periods, including the possible impairment of goodwill.” The group said it was still aiming to cut £250m of costs by the end of the year, which included a headcount reduction of 500 in the second quarter. A spokeswoman said that figure had been achieved as a result of people leaving the business and not being replaced, and that job cuts would not be made until after September. The chief executive, Alison Rose, said the lender was still in a strong financial position: “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.” NatWest is the latest UK bank to reveal the mounting costs of the pandemic. Lloyds reported a second-quarter loss of £676m after putting aside £2.4bn for bad debts. Barclays’ quarterly profit plunged 75% to £359m after a £1.6bn loan loss charge. Smaller lenders have also struggled. TSB – which is owned by Spain’s Sabadell - reported a £65.5m loss for the first half of 2019 compared with a profit of £21.1m a year earlier, after taking a £111m loan loss charge. The bank has already slashed 1,000 jobs in the past year and is closing 82 branches by the end of this year. However, Sabadell said on Thursday that it was looking at accelerating cost cuts at TSB, raising the prospect of further job losses. Annual losses at the digital bank Monzo ballooned to £114m in the year to February from £50m a year earlier, as it warned that the financial strain of the Covid-19 crisis had put the company’s future at risk. “This increases the risk that the group will not be able to execute its business plan, which could adversely impact its ability to generate a profit or raise sufficient capital to meet future regulatory capital requirements,” Monzo warned in its annual report. On Monday, HSBC will be the last big UK lender to report its second-quarter results. It is expected to report loan loss charges of $2.7bn (£2bn), which is more than the $2.5bn it is likely to post in pre-tax profits, according to consensus estimates.