NatWest is set to reveal its largest annual profit since the 2008 financial crisis amid speculation that the taxpayer-backed bank will ramp up the size of its bonus pool just as consumers struggle with the cost of living crisis. The banking group, which is still 45% state-owned, is expected to report £5.1bn in pre-tax profits for 2022 when it reveals annual results on Friday, according to City analysts. Under its chief executive, Alison Rose, NatWest has made progress on repairing its reputation since being bailed out during the 2008 financial crisis, when it was known as Royal Bank of Scotland Group. However, a further increase in its bonus pool, which rose 44% to £298m last year, is likely to renew controversy while many people struggle with soaring living costs, given the large government stake. A series of interest rate hikes by the Bank of England, compounded by Liz Truss’s disastrous mini-budget in September, have led UK lenders to drastically increase borrowing costs on mortgages and loans. While Rose and the chief executives of Britain’s other big high street banks have denied shortchanging savers by failing to increase interest rates on savings accounts at the same pace as the rise in the Bank base rate, analysts said rising income from interest charges would boost annual profits. Analyst forecasts point to a 32% jump in NatWest’s net interest income – the difference between what the bank charges for loans and what it pays in interest on deposits – to £9.9bn for 2022, up from £7.5bn a year earlier. Last week, Rose played down the role that higher interest charges would have in her own bonus, telling MPs on the Treasury select committee that while profits were considered, “we would not be able to meet performance [targets] by … net interest margin”. With the taxpayer stake in NatWest still worth more than £10bn, the rise in profits is likely to trigger speculation over whether the government will sell more of a stake in an effort to claw back some of the losses on the £45bn bailout of RBS in 2008. The Sunday Times said a rise in profits could help Rose announce plans to buy back shares from the government next month. NatWest is also expected to have put aside £434m for the year to cushion the blow of potential defaults by customers as the cost of living crisis heaps pressure on households and businesses. Barclays, which will be the first UK bank to report its 2022 earnings on Wednesday, is expected to have taken a £1.2bn charge for a potential surge in bad debts. This is on top of £1.6bn for legal and misconduct charges after a trading blunder led to the sale of US securities that Barclays had not been authorised to sell. Together, the charges are expected to offset a 20% rise in total income, resulting in profits of £7.2bn for 2022, down from £8.4bn a year earlier. Money put aside for potential defaults is also expected to weigh on Lloyds Banking Group, where profits for 2022 are expected to stay flat at about £6.9bn. That is despite expectations for the UK’s largest mortgage lender to report a near 40% jump in net interest income to £13bn. Lloyds will report its full-year results on 22 February, a day after HSBC, which makes the bulk of its profits in Asia and is expected to report a 7% drop to $17.5bn (£14.5bn), down from $18.9bn in 2021. John Cronin, a financial analyst at the stockbroker Goodbody, said higher interest rates would provide “tailwinds” for Britain’s biggest banks. “However … we will see the sector book significantly higher provision charges for the fourth quarter relative to the first three quarters of 2022 in anticipation of rising loan losses through 2023,” he said. That was despite the fact that banks continued to report minimal signs of stress on their loans books, Cronin added.