SHARES in Royal Bank of Scotland owner NatWest Group surged more than seven per cent in morning trading after revealing plans to return hefty amounts of cash to investors.

The bank this morning announced an interim dividend of 3.5p per share, up 17%, alongside a special dividend of £1.75 billion, worth 16.8p per share.

Taken alongside a directed buyback announced in the first quarter, the bank said the capital distributions in the first half totalled £3.3bn.

NatWest unveiled the pay-outs as it reported an operating profit of £2.6 billion for the half-year ended June 30, up from £2.3bn. Income rose to £6.2bn from £5.1bn as the bank has benefited from successive increases in the base rate by the Bank of England to combat rising inflation.

Chief executive Alison Rose said the bank was conscious of the impact that the rising cost of living was having on households and families, and has responded with a “range of targeted measures to support those who are likely to need it most.” But she told reporters this morning that the bank was “not seeing an increase in distress” among customers.

Ms Rose said in a statement: “We know that continued increases in the cost of living are impacting people, families and businesses across the UK and we have put in place a range of targeted measures to support those who are likely to need it most. Our strong levels of profitability and capital generation mean we are well positioned to provide this support.”

Russ Mould, investment director at AJ Bell, said: “In a mixed UK bank reporting season so far, there’s no question who is getting the gold star. Natwest has knocked it out of the park with its latest results. It’s hard to see what more it could have done to impress the market.

“Profit ahead of expectations: check. Big shareholder returns: check. Raised guidance: check. It all adds up to suggest that rising rates are helping to boost the profitability of the group.”

Shares were trading at 245.8p at 9.30am, up 15.8p.