NatWest Group (NYSE:NWG) outlined broad-based growth, higher income, and an updated capital framework during its full-year 2025 fixed income results update, with CFO Katie Murray and Treasurer Donal Quaid highlighting balance sheet strength, funding plans, and forward guidance.
2025 performance: growth across lending, deposits, and wealth
Murray said the group added 1 million new customers in 2025 and delivered growth across its three businesses. Customer loans rose 5.6% to GBP 392.7 billion, customer deposits increased 2.4% to GBP 442 billion, and assets under management and administration (AUMA) jumped nearly 20% to GBP 58.5 billion.
NatWest’s return on tangible equity (ROTE) was 19.2%. Earnings per share rose 27% to GBP 0.68, dividends per share increased 51% to GBP 0.325, and tangible net asset value per share rose 17% to GBP 3.84.
Net interest margin, structural hedge, and fee trends
Murray said income growth was largely driven by higher net interest income, as balance sheet growth and benefits of the structural hedge more than offset the impact of Bank of England rate cuts. Net interest margin increased 21 basis points to 234 basis points, which management attributed mainly to deposit growth and margin expansion.
Non-interest income grew 1.3%, which Murray linked to “solid customer activity” across investment, foreign exchange, and capital markets. In wealth, NatWest reported net flows into AUMA of GBP 4.6 billion, up 44%, and fee income from higher AUMAs increased 11% to GBP 300 million.
A key theme was continued momentum from the group’s structural hedge. Murray said the combined product and equity structural hedges total GBP 198 billion. In 2025, product hedge income was GBP 4.2 billion, up GBP 1.2 billion year over year, while equity hedge income was “almost” GBP 500 million, around GBP 50 million higher than recent years. Based on the group’s current macro assumptions and hedge durations, management expects the hedge yield to rise from 2.4% in 2025 to around 3.1% in 2026. The company illustrated expectations for higher hedge income, stating it expects 2026 total hedge income to be around GBP 1.5 billion higher than 2025 and 2027 to be around GBP 1 billion higher than 2026, reaching total hedge income of around GBP 7.2 billion, while emphasizing that results will depend on reinvestment rates and the composition of CAL growth.
Costs, impairments, and macro assumptions
On expenses, Murray said other operating expenses were GBP 8.1 billion and included one-time integration costs of GBP 96 million, in line with guidance. She said the bank delivered around GBP 600 million of gross cost savings, which supported investment in simplification programs. The cost-income ratio improved to 48.6%, down 4.8 percentage points year over year. For 2026, management guided to other operating expenses of around GBP 8.2 billion.
Murray also updated macro assumptions for 2026, describing a base case of “moderate growth,” slightly lower than the prior view, with unemployment expected to peak in 2026 at levels the bank is “comfortable with” from a risk appetite perspective. Management expects a terminal bank rate of 3.25% by the end of 2026. NatWest reported expected credit losses (ECL) of GBP 3.6 billion and ECL coverage of 83 basis points, with Stage 3 loans at 1.1% (down year over year). Post-model adjustments for economic uncertainty were GBP 246 million and described as broadly stable.
For impairments, Murray said the group saw “no significant signs of stress” and that performance was broadly in line with expectations. For 2026, NatWest guided to a loan impairment rate below 25 basis points. In Q&A, management said the higher guide versus 2025 reflects normalization, fewer one-off releases, loan growth, and mix changes—particularly an increase in retail unsecured lending, which grew more than GBP 3 billion in 2025 and rose to over 8% of the retail mix from around 6.5% in 2023. Murray emphasized the guidance was not dependent on post-model adjustment releases and did not reflect a material shift in risk appetite.
Capital, liquidity, and funding: target CET1 reduced to around 13%
Quaid said NatWest ended 2025 with a CET1 ratio of 14%, a total MREL ratio of 31.9%, and a leverage ratio of 4.8%, while average liquidity coverage ratio was 147% and average net stable funding ratio was 135%. Primary liquidity was GBP 157 billion, and the loan-to-deposit ratio was 88%.
Capital generation before distributions was 252 basis points in 2025, with “almost 300 basis points” from earnings partly offset by 89 basis points tied to risk-weighted asset growth. Quaid said distributions—including accruals for an ordinary dividend payout of around 50% and a GBP 750 million share buyback announced earlier in the week—accounted for 213 basis points of capital. Risk-weighted assets rose GBP 10.1 billion to GBP 193.3 billion, within the guided range of GBP 190-195 billion. Quaid also discussed Basel 3.1, which takes effect Jan. 1, 2027, and said the bank currently expects an RWA impact of around GBP 10 billion based on recalibration of a higher balance sheet, driven mainly by operational risk and removal of SME and infrastructure support factors.
NatWest announced a reduction in its CET1 target to around 13%, from the long-standing 13%-14% range in place since 2019. Quaid said the revised target considers expected reductions in Pillar 2 requirements on Jan. 1, 2027, and the capital impact of the Evelyn acquisition announced earlier in the week. He described the revised target as maintaining a “healthy buffer” above minimum requirements.
Quaid also noted NatWest’s performance in the Bank of England stress test, stating the group had the lowest capital depletion under stress and was the only U.K. bank with no strategic management actions required.
On funding, Quaid said NatWest completed its 2025 plan with GBP 7.1 billion sterling equivalent of benchmark issuance from NatWest Group across Senior MREL, AT1, and Tier 2, plus GBP 7.9 billion sterling equivalent from NatWest Markets. For 2026, management guided to around GBP 3 billion of Holdco Senior issuance, around GBP 1 billion equivalents each of AT1 and Tier 2 issuance, and described plans for NatWest Bank to return to secured credit markets with an expected requirement of around GBP 1 billion. In Q&A, Quaid said the lower 2026 Holdco Senior figure is driven by the maturity profile and suggested issuance would move “roughly” GBP 2 billion higher beyond 2026.
In discussion of capital optimization, Quaid said the bank completed five significant risk transfer (SRT) transactions in Commercial & Institutional in 2025, delivering GBP 4.6 billion of RWA optimization, and executed retail securitization of Stage 2 and Stage 3 mortgages, generating a further GBP 2 billion of RWA benefits. He said SRTs remain an important tool and that the bank sees demand across multiple asset classes, with potential for further transactions in 2026 and 2027.
2026 outlook and 2028 targets
Excluding the impact of the Evelyn Partners acquisition, NatWest guided for 2026 income excluding notable items of GBP 17.2 billion to GBP 17.6 billion, other operating expenses of around GBP 8.2 billion, capital generation before distributions of around 200 basis points, and ROTE greater than 17%, alongside loan impairment rate guidance below 25 basis points.
Looking to 2028, Murray said the group aims to:
- Grow customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028
- Reduce the cost-income ratio to below 45%
- Generate more than 200 basis points of capital before distributions while operating with a CET1 ratio of around 13%
- Deliver ROTE greater than 18% in 2028
Management said its priorities include disciplined growth focused on key customer segments, making it easier for customers to engage with the bank, and broadening propositions. Murray added that the group plans to continue investing in simplification—“in particular in AI”—and emphasized capital redeployment, dynamic pricing, and the use of data and analytics to improve agility and returns.
About NatWest Group (NYSE:NWG)
NatWest Group plc is a major UK-based banking and financial services group headquartered in Edinburgh, Scotland. The company traces its roots to the Royal Bank of Scotland, founded in 1727, and adopted the NatWest Group name in 2020 as part of a strategic refocus on its NatWest brand. NatWest Group is listed on the London Stock Exchange and also has American depositary shares trading on the New York Stock Exchange under the symbol NWG.
The group provides a broad range of banking services across retail, private, commercial, corporate and institutional segments.
