NatWest Group Q4 2025 Earnings Report

NatWest Group EPS Results

• Actual EPS: $0.46
• Consensus EPS: $0.38
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

NatWest Group Revenue Results

• Actual Revenue: $5.74 billion
• Expected Revenue: $5.59 billion
• Beat/Miss: Beat by +$157.13 million
• YoY Revenue Growth: N/A

NatWest Group Announcement Details

• Quarter: Q4 2025
• Date: 2/12/2026
• Time: Before Market Opens
• Conference Call Date: Friday, February 13, 2026
• Conference Call Time: 4:00AM ET

NatWest Group (NYSE:NWG) is a United Kingdom-based banking and financial services company. Through brands including NatWest, Royal Bank of Scotland, Ulster Bank in Northern Ireland and Coutts, it provides banking and financial solutions to individuals, families, businesses and institutional clients.

The group’s activities include personal and premier banking, current and savings accounts, residential mortgages, consumer lending, credit cards, wealth management, business banking, commercial lending, transaction services and investment banking. It also offers financial planning and private banking services to affluent and high-net-worth customers.

NatWest Group primarily serves customers in the United Kingdom across its retail, commercial and institutional businesses. The company traces its heritage to the formation of National Westminster Bank in 1968 and The Royal Bank of Scotland, which was established in 1727. The group was formerly known as The Royal Bank of Scotland Group and adopted the NatWest Group name in 2020.

NatWest Group is headquartered in London. Paul Thwaite serves as chief executive officer, and Rick Haythornthwaite serves as chair.

NatWest Group Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Delivered a strong FY2025: income (ex-notables) up 12% to £16.4bn, operating profit £7.7bn, attributable profit £5.5bn, EPS +27%, cost‑income ratio down to 48.6% and total shareholder distributions of £4.1bn.
• Positive Sentiment: 2026 guidance and 2028 targets show clear growth and return ambitions — 2026: income (ex-notables) £17.2–17.6bn, opex ~£8.2bn, impairment <25bps, ~200bps capital generation and ROTE >17%; 2028 targets include CAL growth >4% p.a., cost‑income <45% and ROTE >18%.
• Positive Sentiment: Announced acquisition of Evelyn Partners (adds ~£69bn AUMA) to scale private banking/wealth to ~20% of the group, with management expecting material revenue synergies (~£700m+), ~£100m run‑rate cost synergies and accretion to returns by year three (day‑one CET1 impact ≈130bps).
• Positive Sentiment: Management expects a material hedge income tailwind from its product and equity structural hedges — roughly +£1.5bn in 2026 vs 2025 and further uplift into 2027–2030 — supporting margin expansion under stated reinvestment assumptions.
• Negative Sentiment: Regulatory/RWA headwinds remain — implementation of Basel 3.1 is expected to increase RWAs by ~£10bn from Jan 2027, raising nominal CET1 requirements and creating potential pressure on capital/distribution flexibility despite planned capital generation.

Presentation

[Operator]

Good morning, and welcome to NatWest Group's full year 2025 results management presentation. Today's presentation will be presented by CEO, Paul Thwaite, and CFO, Katie Murray. After the presentation, we will take questions.

[Paul Thwaite, CEO at NatWest Group]

Good morning, and thank you for joining us today. As usual, I'm here with Katie, who will take you through the full year performance. After that, I'll talk about our strategy and our new 2028 targets. But first, let me start with an overview of 2025, a year in which we delivered another strong performance and made good progress on each of our strategic priorities. Highlights of the year include a return to private ownership in May, opening a new chapter for the bank with a focus on driving growth. Continued organic growth, together with successful completion of the Sainsbury's Bank transaction, improving operational leverage with a reduction in our cost-income ratio of 4.8 percentage points, together with strong capital generation, enabling total distributions to shareholders of GBP 4.1 billion.

[Paul Thwaite, CEO at NatWest Group]

You will also be aware that we announced the acquisition of the financial planning and investment firm, Evelyn Partners, earlier this week, which I'll talk about later. Let's turn to the headlines. We added one million new customers during 2025 and delivered broad-based growth across all three businesses. Lending grew 5.6% to GBP 393 billion. Deposits were up 2.4% to GBP 442 billion, and assets under management and administration increased 20% to GBP 58.5 billion. This activity resulted in strong income growth of 12% to GBP 16.4 billion. Costs grew 2% to GBP 8 billion, resulting in positive jaws of 10%. The cost income ratio reduced to 48.6%. This led to operating profit of GBP 7.7 billion and attributable profit of GBP 5.5 billion.

[Paul Thwaite, CEO at NatWest Group]

Earnings per share grew 27% to GBP 0.68. Dividends per share increased 51% to GBP 0.325, and tangible net asset value per share was up 17% to GBP 3.84. Our CET1 ratio was 14%, and return on tangible equity was 19.2%. As you can see here, these results are either in line with or above our strengthened guidance. Our strong risk management is evidenced by a loan impairment rate of 16 basis points, and total distributions announced in 2025 of GBP 4.1 billion, comprised buybacks of GBP 1.5 billion and dividends of GBP 2.6 billion, in line with our payout ratio of around 50%. This includes the buyback of GBP 750 million announced on Monday, along with our acquisition of Evelyn Partners.

[Paul Thwaite, CEO at NatWest Group]

These results continue our track record of delivering value for shareholders. Over the past four years, earnings per share have more than doubled, growing at a rate of 26% a year. Dividends per share have more than tripled, increasing at a rate of 33% a year, and TNAV per share has grown 41% at a rate of 9% a year. At the same time, our share count has reduced from over 11 billion to just under eight billion. Turning now to our three strategic priorities. I'll start with disciplined growth. We now serve over 20 million customers across our three businesses, and 2025 marks our seventh consecutive year of growing customer balances. In retail banking, our customer base increased by more than 5%, and customer assets and liabilities grew 4% to GBP 421 billion.

[Paul Thwaite, CEO at NatWest Group]

This includes the addition of around 1 million new customer accounts from the Sainsbury's transaction, which contributed to our unsecured stock share growing from 6.4%-7.2%, including an increase from 9.7%-10.6% in credit cards. In mortgages, we increased our flow share of first-time buyers from 10%-12% and of the buy-to-let market from 3%-6%. We are also extending our reach through NatWest Boxed, which provides embedded finance to companies such as the AA and Saga. In private banking and wealth management, over 50,000 customers invested with us for the first time in 2025. Net new flows to assets under management grew 41%, and assets under management and administration increased 20% to GBP 58.5 billion.

[Paul Thwaite, CEO at NatWest Group]

AUMA is now 49% of client assets and liabilities, up four percentage points on the prior year, and customer assets and liabilities grew 10% to GBP 119 billion. In commercial and institutional, we extended our expertise in FX to a further 700 mid-market customers during the year, many of them via our online platform for FX, Agile Markets, where the number of users grew 13%. This contributed to FX revenue growth of around 20%. Lending balance growth was strong at 10% or GBP 14 billion. We lent GBP 4.6 billion to the UK social housing sector, where we reached our GBP 7.5 billion ambition ahead of schedule and have announced a new GBP 10 billion ambition for 2028.

[Paul Thwaite, CEO at NatWest Group]

We are also the leading lender to UK infrastructure projects, and we delivered GBP 19 billion of climate and transition finance towards our 2030 target of GBP 200 billion, of which GBP 16 billion was in commercial and institutional. I'd like to turn now to our second strategic priority, bank-wide simplification. We continue to invest to improve customer experience and increase efficiency. During the year, we made gross cost savings of around GBP 600 million, which is over 7% of our 2024 cost base. And we created GBP 100 million of investment capacity in 2025 to reinvest and further accelerate our transformation. Taking a look at each business. In retail banking, our award-winning app has a Net Promoter Score of 51, and as we continue to invest to improve customer experience, we launched more than 100 new features during the year.

[Paul Thwaite, CEO at NatWest Group]

We also launched generative AI enhancements in our digital assistant, Cora. As a result, the number of queries that can be resolved has increased by 20 percentage points. cost-income ratio in retail banking decreased from 50% to 45%. In private banking and wealth management, we doubled the number of enhancements on the app, increasing our rating on the App Store to 4.4 and our Net Promoter Score to 54, up from 50 at our spotlight last June. In addition, we are leveraging group capabilities to simplify our operations. For example, we rehosted our core banking platform from Switzerland to the group data center in the U.K., and we are co-locating our people with other NatWest teams, so we are relocating our tech team from Switzerland to the U.K. and India. cost-income ratio in private banking and wealth management reduced 10 percentage points to 64%.

[Paul Thwaite, CEO at NatWest Group]

In commercial mid-market banking, we are investing in our digital platform, Bankline, to give customers a single point of access to a wide range of products. We have now integrated our asset finance, invoice finance, payments, commercial cards, FX, and trade platforms within Bankline, and customers accessed products via Bankline around 300,000 times last year. We also took steps to reduce our legal entities and branches in Europe. The cost-income ratio in commercial institutional reduced from 52% to 49%. Turning now to our third strategic priority, managing capital and risk. We generated 252 basis points of capital during the year, supported by reducing RWAs by GBP 10.9 billion through capital management. This includes 5 significant risk transfers in commercial and institutional, and a GBP 2 billion mortgage securitization in retail banking.

[Paul Thwaite, CEO at NatWest Group]

We have a high-quality lending book in all three businesses, with a low level of impairment at 16 basis points of loans. All this enables us to recycle capital into areas where we have chosen to grow. The successful implementation of our strategy gives us the ability to invest in the business, support customer growth, and deliver attractive returns to shareholders. As I mentioned earlier, we have announced total distributions of GBP 4.1 billion for 2025, representing 75% of attributable profit. With that, I'd like to hand over to Katie to take you through our financial performance.

[Katie Murray, CFO at NatWest Group]

Thank you, Paul. I'll start with our performance for the full year, where, as Paul said, we have either met or exceeded our third quarter guidance. Income, excluding all notable items, was up 12% at GBP 16.4 billion. Total income included 241 million of notable items. Total operating expenses were 1.4% higher at GBP 8.3 billion, and the impairment charge was GBP 671 million, or 16 basis points of loans. Taken together, this delivered operating profit before tax of GBP 7.7 billion, and profit attributable to ordinary shareholders of GBP 5.5 billion. Our return on tangible equity was 19.2%. Turning now to the fourth quarter compared with the third, income, excluding all notable items, was up 2.5% at GBP 4.3 billion.

[Katie Murray, CFO at NatWest Group]

Operating expenses were GBP 2.2 billion, including the annual bank levy. The impairment charge was GBP 136 million, or 13 basis points of loans, bringing operating profit before tax to GBP 1.9 billion. Profit attributable to ordinary shareholders was GBP 1.4 billion. Our return on tangible equity was 18.3%. Turning now to income. Full year income, excluding notable items of GBP 16.4 billion, exceeded our guidance of around GBP 16.3 billion. Across the three businesses, income grew by GBP 1.8 billion. This was largely driven by higher net interest income, as balance sheet growth and the benefits of the structural hedge more than offset the impact of the Bank of England rate cuts. Net interest margin was up 21 basis points to 234 basis points, mainly due to deposit growth, coupled with margin expansion.

[Katie Murray, CFO at NatWest Group]

Non-interest income grew 1.3%, reflecting solid customer activity as we supported their investment, FX, and capital requirements. Turning to the fourth quarter, income, excluding notable items, grew 2.5% to GBP 4.3 billion.... Across our three businesses, income increased by 2.8%, or GBP 116 million. Net interest income grew 4.5%, or GBP 148 million, reflecting the trend over the year of volume growth alongside margin expansion. As a result, net interest margin was up 8 basis points to 245 basis points. Non-interest income across the three businesses was down 3.7%, mainly driven by commercial and institutional, reflecting typical seasonality after a strong third quarter. Turning to 2026 guidance, which excludes the impact of Evelyn Partners.

[Katie Murray, CFO at NatWest Group]

We expect income, excluding notable items, to be within a range of GBP 17.2 billion-GBP 17.6 billion, and our current forecast is within this range. Turning to growth. As you heard from Paul, our three businesses have a strong track record of growth over the last 7 years. We have grown customer lending at 4.5% a year. This includes broad-based organic growth, as well as acquisitions, which support scale in underweight areas such as mortgages and unsecured lending. Customer deposits have grown 3.9% a year, supported by a boost during COVID, as well as new propositions and an improved digital offering. AUMAs have grown at 12% a year and have more than doubled since 2018. These three elements together make up customer, assets, and liabilities, or CAL, which has grown at 4.6% a year.

[Katie Murray, CFO at NatWest Group]

We focus on this metric, as it reflects the breadth of balance sheet solutions we offer to meet customer needs. This track record gives us confidence that we can continue to grow CAL in the future, and Paul will talk more about our 2028 target shortly. Let me take you through the last year for each of these elements in turn. We delivered another year of strong lending growth. Gross loans to customers across our three businesses increased 5.6%, or GBP 20.9 billion, to GBP 392.7 billion. There was broad-based growth across mortgages as we increased our flow share of the first-time buyer and buy-to-let markets, with strong retention as well as new business flows.

[Katie Murray, CFO at NatWest Group]

Unsecured lending growth was supported by the addition of Sainsbury's Bank balances and the first full year of our personal loans offering for the whole of market. In commercial and institutional, we grew in all three businesses, with lending up GBP 14 billion or 10%, excluding the repayment of government loan schemes. This reflects our leading position as the U.K.'s biggest bank for business, with growth across social housing, residential commercial real estate, infrastructure, project finance, and funds lending. I'll now turn to deposits. Customer deposits across our three businesses increased 2.4% to GBP 442 billion, with a stable mix throughout the year. Retail banking deposits increased GBP 7.8 billion, or 4%, reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury's Bank.

[Katie Murray, CFO at NatWest Group]

This includes growth in the fourth quarter of GBP 6.8 billion, reflecting strong growth in savings of GBP 6.4 billion, supported by our limited edition saver and term products, and growth in our current accounts of GBP 0.4 billion. Private banking and wealth management increased by GBP 300 million in 2025, also reflecting growth in current accounts and saving balances, with progress driven by both deeper engagement with our existing customers and new customer acquisition. C&I deposits increased GBP 2.3 billion, reflecting growth within large corporates and business banking. Moving now to assets under management. We are pleased to see the plans we talked about at the June spotlight delivering for our customers and shareholders. AUMAs increased almost 20% this year to GBP 58.5 billion, and net flows of GBP 4.6 billion were up 44%.

[Katie Murray, CFO at NatWest Group]

Fee income from higher AUMAs grew 11% to GBP 300 million. Moving now to the continued tailwind from our structural hedge. As you will be aware, in addition to our product structural hedge, we also have a longer duration equity structural hedge. Together, they are GBP 198 billion in size, GBP 4 billion higher than last year, and are an important driver of income growth. In 2025, product hedge income was GBP 4.2 billion. This is GBP 1.2 billion higher than the previous year and GBP 3.2 billion higher than 2021. Our equity hedge income was almost GBP 500 million, which is around GBP 50 million higher than the previous year and around 25% more than 2021. The yield on both hedges has increased significantly over the last few years as interest rates rose.

[Katie Murray, CFO at NatWest Group]

This slide shows our expectation for future yield progression based on our current macroeconomic assumptions and hedge durations, together with associated income growth. We expect yield to increase from 2.4% in 2025 to around 3.1% in 2026, with further increases thereafter. Our illustration here assumes steadily increasing average notional balances for both the product and equity hedges, driven by growth in CAL and higher levels of capital held to support that growth. This expectation of increasing yield and notional balances drives higher annual income through to 2030. We are sharing our expectations for this year and next as more of the near-term income growth is locked in.

[Katie Murray, CFO at NatWest Group]

We expect 2026 total hedge income to be around GBP 1.5 billion higher than 2025, and for 2027 to be around GBP 1 billion higher than 2026, reaching total income of around GBP 7.2 billion. Exactly how this develops will be subject to the prevailing reinvestment rates each year, as well as the composition of growth in CAL. Turning now to costs. Other operating expenses were GBP 8.1 billion, including one-time integration costs of GBP 96 million, in line with our guidance. We are pleased with our delivery of around GBP 600 million of gross cost savings, which has allowed us to invest in business growth and accelerate our simplification program. Costs grew 1.8% if you exclude one-time integration costs. Our cost income ratio reduced to 4.8 percentage points to 48.6%.

[Katie Murray, CFO at NatWest Group]

In 2026, we expect other operating expenses to be around GBP 8.2 billion. Staff costs will be a key driver of overall cost growth. We also make significant investment in the business each year with a range of initiatives to drive operating leverage. We expect further supplier contract inflation and increased business transformation costs this year. Delivery of around GBP 8.2 billion in 2026 will be supported by another year of significant gross cost savings. Turning now to our updated macro assumptions. Our base case outlook for the macro environment in 2026 assumes moderate growth, slightly lower than our previous year. The unemployment rate increased slightly above our expectation for 2025, and we now expect this to peak in 2026 at levels we are comfortable with in terms of lending risk appetite.

[Katie Murray, CFO at NatWest Group]

We also expect inflation to come down at a slightly faster pace, given the most recent print. We expect lower rates reaching a terminal bank rate of 3.25% by the end of 2026. Our balance sheet remains well provisioned, with expected credit loss of GBP 3.6 billion and ECL coverage of 83 basis points. We are comfortable with 1.1% of Stage Three loans, which is down on the prior year, reflecting management actions in our personal portfolio, together with lower defaults in our non-personal portfolios. Our remaining post-model adjustments for economic uncertainty are GBP 246 million, broadly stable on the third quarter. We will continue to assess these provisions each quarter and release as appropriate.

[Katie Murray, CFO at NatWest Group]

Our latest scenarios also show that even if we were to give 100% weight to our moderate downside scenario, this would increase Stage One and Two ECL by GBP 54 million. I'd like to turn now to the impairment charge for the year. Our prime loan book is well diversified and continues to perform well. We're reporting a net impairment charge of GBP 671 million, equivalent to 16 basis points of loans. There were no significant signs of stress across our three businesses, and impairment levels across our products have performed broadly in line with our expectations. In 2026, we expect our loan impairment rate to be below 25 basis points. This guidance is not dependent upon post-model adjustment releases or any material shift in risk appetite.

[Katie Murray, CFO at NatWest Group]

It's simply a reflection of normalization in impairments and lower one-off releases, as well as growth in the book and ongoing changes in the mix. Turning now to capital. We ended the year with a Common Equity Tier 1 ratio of 14%, up 40 basis points on last year. In 2025, very strong capital generation of 252 basis points took our CET1 ratio before distributions to 16.1%. Distributions accounted for 213 basis points of capital, including accruals for our ordinary dividend payout of around 50%, and our buyback of GBP 750 million that we announced on Monday. Risk-weighted assets increased by GBP 10.1 billion to GBP 193.3 billion within our guided range.

[Katie Murray, CFO at NatWest Group]

GBP 3.8 billion of higher operational risk-weighted assets includes GBP 1.6 billion in the fourth quarter as we brought forward our annual operational risk recalculation from the first quarter in 2026. You should now expect us to include this in the fourth quarter each year. GBP 11.1 billion of business movements broadly reflects our lending growth across the year. This was largely offset by a GBP 10.9 billion reduction from RWA management, including GBP 5.7 billion in the fourth quarter. So in essence, our actions this year have funded the growth in our lending book. Other movements include GBP 7.3 billion from CRD4 model inflation, of which GBP 4.8 billion was in the fourth quarter. We think we are now largely done, though we await PRA approval of our models.

[Katie Murray, CFO at NatWest Group]

There was also GBP 1.2 billion of other risks and FX movements. Going forward, we expect a further impact on RWAs with the implementation of Basel 3.1 in January 2027. Based on our latest recalibration of a higher balance sheet, we currently expect this to increase RWAs by around GBP 10 billion. The majority of the RWA uplift from Basel 3.1 is due to operational risk and the removal of the SME and infrastructure support factors. We do expect an offset in our Pillar Two requirements at the same time for these elements, but the net result will still require us to hold a higher nominal amount of CET1, given the offsets are at a total capital level. We also expect future growth to consume more capital in the form of RWAs.

[Katie Murray, CFO at NatWest Group]

Despite this, we are confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets, and we are guiding to capital generation of around 200 basis points before distributions in 2026. Turning now to our CET1 ratio. Our CET1 target of 13%-14% has been in place since 2019. As you know, we've been actively looking at this over the last year or so. Today, our minimum CET1 requirement stands at 11.6%, and as you know, there are no changes to the capital requirements in the latest FPC review, so our supervisory minimum remains 11.6%. We expect this to reduce further with the implementation of Basel 3.1 next year, with a reduction in our Pillar II requirement, as I just mentioned. Today, we are holding considerably more capital despite de-risking.

[Katie Murray, CFO at NatWest Group]

The successful restructuring of the bank is evident from the consistent and material improvement in our Bank of England stress test results. The performance of the business has materially improved, and we have demonstrated a track record of strong earnings, high capital generation, and returns. So as a result of all of these considerations, and taking into account the views of stakeholders, including investors, rating agencies, and regulators, we are reducing our CET1 target to around 13%. This represents a healthy buffer over our MDA and supervisory minimum requirements and also reflects the expected reduction in Pillar II requirements on the first of January, 2027. Turning now to our acquisition of Evelyn Partners. As we outlined on Monday, we see a strong strategic rationale for this acquisition.

[Katie Murray, CFO at NatWest Group]

It brings GBP 69 billion of AUMA, scaling our private banking and wealth management to 20% of Group Co, a third growth engine for the group. It increases fee income by almost 20% on day one, and ultimately, it makes us a faster-growing, higher-returning bank with higher distribution capacity for shareholders. Operationally, it is deliverable, culturally, we are aligned, and financially, it delivers for shareholders. So let me show you how we expect to deliver a return on invested capital above that generated via a share buyback by year three after completion. We provided you with Evelyn Partners' 2025 income costs and earnings before interest, tax depreciation, and amortization, or EBITDA.

[Katie Murray, CFO at NatWest Group]

Revenue synergies include bringing Evelyn Partners broad range of financial planning and wealth management solutions to all our customers, enhancing our D2C investment offering via Bestinvest, leveraging Evelyn Partners technology for portfolio management solutions, and providing Evelyn Partners customers with our full range of banking solutions and combined wealth management offering. The business has grown AUMA at more than 7% a year for the last two years, and bringing the combined capabilities to our customer base of more than 20 million is a significant opportunity to create value. The benefit of being part of NatWest Group should deliver income greater than GBP 700 million. We expect to realize around GBP 100 million of cost synergies by removing duplication in shared services and technology applications, where there is high alignment between our platforms as well as efficiencies of scale.

[Katie Murray, CFO at NatWest Group]

The cost to achieve of approximately GBP 150 million will be phased over three years. This means we expect costs to fall in absolute terms to less than GBP 300 million by year three. Together, this drives EBITDA of around GBP 400 million. When assessing the transaction, we look at the returns accruing to capital, in other words, the return on invested capital. We do not include the amortization of purchased intangibles, since amortization does not flow through to capital and does not impact our distribution capacity to shareholders. The cost of intangibles are taken in the day one impact of around 130 basis points on the CET1 ratio. Amortization is included in return on tangible equity. This is a capital-light business with very high returns on tangible equity, clearly accretive to the group in year one and beyond.

[Katie Murray, CFO at NatWest Group]

Beyond year 3, we see further improvement in returns, driven by compounding net new money growth, driving higher assets under management, and ultimately, stronger income growth. Turning now to returns. This shows the drivers of return on tangible equity in 2026. The notable items in 2025 income and tax credits, which together account for around 1.3 percentage points of ROTIE. Clearly, the year-on-year change in some P&L lines will impact ROTIE more than others, with income growth being the biggest driver. Naturally, the level of return will also be impacted by growth in the denominator, average tangible equity. This will be driven by earnings, balance sheet growth, and further unwind of the cash flow hedge reserve. Overall, in 2026, we expect to deliver a return on tangible equity of greater than 17%.

[Katie Murray, CFO at NatWest Group]

To summarize our guidance, excluding the impact of Evelyn Partners acquisition in 2026, we expect income, excluding notable items, to be in the range of GBP 17.2 billion-GBP 17.6 billion. Other operating expenses to be around GBP 8.2 billion. The loan impairment rate to be below 25 basis points. Capital generation before distributions of around 200 basis points, and a return on tangible equity greater than 17%. With that, I'll hand back to Paul. Thank you.

[Paul Thwaite, CEO at NatWest Group]

Thank you, Katie. So you've heard about our guidance for 2026. I'm now going to talk about our plans for the next three years and 2028 targets, which include the impact of the Evelyn Partners acquisition. You will be familiar with this slide, as you've heard about each one of our three businesses over the past year in our investor spotlights. We are building on strong foundations with a customer base of more than 20 million, and leading positions in each of our businesses, all of which deliver attractive returns. Our retail bank has a track record of growing share profitably, with an opportunity to align areas such as mortgages, savings, and unsecured lending more closely with our 16.5% share in current accounts.

[Paul Thwaite, CEO at NatWest Group]

Private banking and wealth management has a leading private bank with a strong brand, and acts as a center for excellence within the group for investment products and solutions. With the acquisition of Evelyn Partners, a market-leading financial planning and investment management firm, we are creating the U.K.'s leading private bank and wealth manager. The combination increases assets under management and administration to GBP 127 billion and CAL to GBP 188 billion. It both transforms the scale of the business and the breadth of our financial planning and investment offering to meet more customers' needs across the group, further accelerating growth in assets under management. Commercial and Institutional is the U.K.'s biggest bank for business, with a 25% share of deposits and 20% share of lending.

[Paul Thwaite, CEO at NatWest Group]

We are a leading bank for startups in the U.K., with the largest presence in the mid-market sector, where we see significant opportunity. The scale and strength of our customer franchise gives us a strong base to build on, with plenty of capacity for further growth. We believe the macro economy in the U.K. provides a supportive environment. Consumers in aggregate are managing well. You can see here that households are paying down debt, and savings rates are high. Despite a challenging environment, particularly for sectors such as retail and hospitality, UK corporates are de-levering, and investment is steadily increasing. In addition, there are reasons to feel confident about the broader economy. In the housing market, interest rates are coming down, the government has set ambitious building targets and is committed to investing in social housing. There is a huge shift of generational wealth to younger generations underway.

[Paul Thwaite, CEO at NatWest Group]

While the FCA's Advice Guidance Boundary Review opens up an opportunity for thousands of people who currently receive no financial advice. The U.K. is home to high-growth sectors and businesses, with an innovation sector that is growing faster than the UK economy. It's against this backdrop that we have been thinking about our strategy and 2028 targets. Our strong performance in recent years demonstrates that our strategy is working. However, we review it on an ongoing basis and have refined our three priorities as we raise our ambition for the bank and target a 2028 return on tangible equity greater than 18%. So let me talk about each priority in turn. We remain committed to pursuing disciplined growth with an emphasis on returns.

[Paul Thwaite, CEO at NatWest Group]

First, by focusing on key customer segments. Second, by making it easier for customers to engage with us. And third, by broadening our propositions to ensure we serve more customers' needs. Our second priority has evolved to become leveraging simplification, reflecting the advances and progress we have made. We will continue to invest, in particular in AI, to drive growth, improve productivity, and enhance the customer experience. And we will continue to manage our balance sheet and risk well by redeploying capital to drive returns, and by putting a greater emphasis on dynamic pricing as we increase our speed and agility with more advanced data and analytics. The purpose of these priorities is to deliver growth at attractive returns for shareholders.

[Paul Thwaite, CEO at NatWest Group]

Our increased ambition on returns is underpinned by three new targets: growing customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028, reducing our 2028 cost-income ratio to below 45%, and generating more than 200 basis points of capital before distributions, while operating with a CET1 ratio of around 13%. These targets take into account the acquisition of Evelyn Partners. So let me talk more about how we aim to achieve this, starting with disciplined growth. In retail banking, our focus is on youth, families, and the affluent segment. In the youth market, we are building on the success of our Rooster Money app, which has grown its customer base 15 times to well over 500,000.

[Paul Thwaite, CEO at NatWest Group]

We bank one in three families in the U.K. and want to build on connections within families and households through savings and mortgage relationships, for example. We also have a clear opportunity to grow in the affluent segment. We have around 1.2 million affluent customers in the retail bank, yet just 500,000 use our Premier proposition. So our aim is to grow our Premier customer base to one million and treble the number of retail customers who choose to invest with us. The Evelyn Partners acquisition will help accelerate the delivery of this ambition. It both enhances our direct-to-consumer investment platform with Bestinvest and broadens our financial planning and investment offering. Private Banking and Wealth Management aims to increase the number of clients with more than GBP 3 million of assets and liabilities by more than 20%.

[Paul Thwaite, CEO at NatWest Group]

This will be supported by trebling the number of referrals from Commercial and Institutional. In Commercial and Institutional, we want to remain the leading bank for U.K. startups and for the commercial mid-market. We serve over one in four businesses in the mid-market segment, businesses that are growing at a higher rate than the UK economy. We have an unparalleled presence across. the U.K., enabling us to build deep relationships based on strong, local, and sector knowledge. We are building on our position as a leading lender to UK infrastructure and UK social housing, as well as our strength in trade and climate and transition finance. Our second lever to deliver growth is making it easier for our customers to engage with us by combining our best technology with the support of our people.

[Paul Thwaite, CEO at NatWest Group]

In retail, most customers bank digitally, but we also have over 1,000 personal bankers and relationship managers, with a 24-hour call service for Premier customers. Private Banking and Wealth Management has 250 advisors and specialists in Coutts, together with an award-winning app supported by Coutts 24, which answers calls 24 hours a day. Evelyn Partners adds 270 financial planners, 325 specialist investment managers, and its own direct-to-consumer investment platform, Bestinvest. Again, it combines expert personal service with digital excellence. Commercial and Institutional has a digital platform, Bankline, an unparalleled network of around 1,000 relationship managers in commercial mid-market banking, and a network of 12 accelerator hubs around the U.K. to help entrepreneurs grow and scale their businesses. We continue to invest in enhancing the digital experience for customers as technology advances and expectations evolve.

[Paul Thwaite, CEO at NatWest Group]

For example, we are transforming our digital assistant, Cora, by deploying generative AI so that it can resolve more complex customer needs. We are moving our data onto a single platform to deliver more personalized propositions, and in Commercial and Institutional, we are investing GBP 100 million over several years to transform Bankline into a state-of-the-art digital platform, giving business customers a single point of access to many of our products and services. Ultimately, we want a joined-up experience which adds value for the customer, however they choose to engage with us. We also want to meet more customers' needs by broadening our offering. For retail banking, this includes areas like home buying, with more support for first-time buyers, with family-backed and shared ownership mortgages, offering more flexible savings accounts, developing tailored propositions for Premier customers, and entering point-of-sale lending. Private Banking and Wealth Management is primarily focused on investments.

[Paul Thwaite, CEO at NatWest Group]

We are broadening our investment proposition to attract both high-net-worth clients and customers in the retail bank. We are preparing our response to the FCA's recommendation for targeted support following their Advice Guidance Boundary Review, and we are broadening our deposit offering. In Commercial and Institutional, we see the UK innovation economy as a key opportunity. Last year, we created a dedicated venture banking team to support innovative venture-backed scale-ups, and we opened new business accelerators last year with four leading universities, which act as incubators with a plan to expand this to 10 over the next two years. By continuing to deliver disciplined growth, our aim is to grow customer assets and liabilities across our three businesses at a rate greater than 4% a year, equivalent to more than GBP 120 billion of balance sheet growth by 2028.

[Paul Thwaite, CEO at NatWest Group]

This will be a mix of broad-based lending growth, higher customer deposits, and strong growth in assets under management and administration. We have already demonstrated our track record of growth. Retail Banking makes up 44% of our customer assets and liabilities, where we have grown more than 5% a year over the past seven years. Private Banking and Wealth Management is currently 13% of CAL, with a strong growth rate of 8.3%. This will grow to around 20% of CAL with the inclusion of Evelyn Partners. Commercial and Institutional represents 37% of CAL, with a growth rate close to 3%. Moving on now to our second strategic priority, leveraging simplification, where I'll start with architecture and data.

[Paul Thwaite, CEO at NatWest Group]

We expect to drive a further GBP 100 million of investment capacity in 2026 by leveraging technology together with further streamlining our processes and governance. We have already made significant progress simplifying our systems and reducing duplication. For example, we decommissioned 200 business applications across the group last year, and we successfully migrated one million customers from Sainsbury's Bank, covering multiple products. Last year, we announced a collaboration with Amazon Web Services to accelerate our data, analytic, and AI capabilities. This collaboration will give us a single view of each customer's relationship with the bank, as well as the tools to analyze data and enrich our customer understanding.... Deployment of AI is not only helping us to automate routine work, such as call summarization, it is also helping our coders to be more productive.

[Paul Thwaite, CEO at NatWest Group]

Over 12,000 software engineers are now able to use AI assistance to generate code. This transformation has enabled us to improve the deployment frequency of updates across the group by more than four times since 2021, and more than treble the new features on our commercial banking digital platform, Bankline. This investment is also increasing our operational resilience. We have reduced the number of critical incidents from nine in 2021 to one last year. Our ambition is to become the leading bank delivering personalized customer propositions, powered by the responsible deployment of agentic AI, so we are building out our capabilities across the bank.

[Paul Thwaite, CEO at NatWest Group]

Last year, we set up an AI research office focused on improving customer experience and efficiency by accelerating the use of AI in fields such as multi-biometrics, audio-visual conversational AI, using proprietary small language models, and ensuring algorithmic fairness, as well as data safety. This shift to agentic AI marks a transition from simple chatbots to autonomous systems that can execute complex banking workflows on behalf of our customers. By prioritizing these capabilities, we can move beyond basic automation towards a simpler, data-driven experience that meets rapidly evolving customer expectations. Many of the building blocks that will make this vision a reality will go live this year. This quarter, our customers will be able to ask questions about their recent spending in their own words on their app, and later this year, we will launch voice-to-voice conversations and more agentic fraud support.

[Paul Thwaite, CEO at NatWest Group]

By delivering income growth ahead of cost growth, we expect to reduce our cost-income ratio below 45% by 2028. Our track record of tight cost control gives us competitive advantage, as it enables further growth. Our ambition is to strengthen our position as the most efficient large bank in the U.K. Turning now to our third strategic priority, active balance sheet and risk management. The strength of our capital funding and liquidity position provides significant opportunity to deliver continued balance sheet growth, together with attractive, sustainable returns for shareholders, whilst operating with a CET1 ratio of around 13%. Our loan-to-deposit ratio of 88% demonstrates the strength of our three businesses and our capacity to deliver material lending growth to support our customers and the U.K economy.

[Paul Thwaite, CEO at NatWest Group]

We continue to recycle inefficient, lower returning capital into attractive growth areas to drive higher returns, and we have been active in significant risk transfers and credit risk insurance to increase capital efficiency. You can also expect to see a greater emphasis on the use of advanced data analytics to drive faster pricing, credit, and asset enablement decisions. In addition, data analytics will help us manage risk dynamically whilst optimizing risk-adjusted returns. We will continue to deliver our through-the-cycle cost of risk of 20-30 basis points, aligned with our risk appetite. We also want to maintain our market-leading position in customer fraud prevention with multi-biometric authentication. Our aim in pursuing disciplined growth, leveraging simplification, and managing capital and risk is to drive strong growth and returns for shareholders. Given our strong track record of delivery, we are raising our future ambitions.

[Paul Thwaite, CEO at NatWest Group]

Let me sum up with our 2028 targets. We aim to grow customer assets and liabilities at a rate greater than 4% a year, as we continue to drive disciplined growth. We are targeting a cost-income ratio below 45%, as we drive positive operating leverage, and we aim to generate more than 200 basis points of capital before distributions, while operating with a CET1 ratio of around 13%. Strong capital generation gives us the ability to support customer growth, invest in the business, and deliver attractive returns to shareholders. We are targeting a return on tangible equity greater than 18% in 2028, and we expect to maintain our dividend payout ratio of 50%, with scope for surplus capital to be returned via buybacks. Thank you very much. We'll open it up now for questions.

[Operator]

We will now take your questions. If you would like to ask a question today, you may do so by using the Raise Hand function on the Zoom app. If you are dialing in by phone, you can press star nine to raise your hand and star six to unmute once prompted. Today's call will last 1.5 hours. We ask that questions are limited to 2 per analyst to allow more people to ask questions. We will pause for a moment while we give everyone an opportunity to signal for questions. Our first question today comes from Sheel Shah from JPMorgan. If you'd like to go ahead and ask your question.

[Paul Thwaite, CEO at NatWest Group]

Hi, Sheel.

[Katie Murray, CFO at NatWest Group]

Hi, Sheel.

[Sheel Shah, Executive Director at JPMorgan]

Hi, guys. Great, thanks for the questions. I've got two, please. Firstly, on costs, the GBP 600 million of cost saves that you've seen in 2025, could you talk about where that's come from and how we should think about the level of cost saves coming in 2026, particularly with regards to some of the technology developments that you've spoken about? And should we be thinking about a cost growth towards the outer years of around a sort of a 2% level going forward? And then secondly, in terms of the greater than 4% customer assets and liabilities target, I was wondering if you can disaggregate this across the divisions, and maybe more specifically, would you expect all of the business areas to be at this target level?

[Sheel Shah, Executive Director at JPMorgan]

You know, I may be sort of pointing at the corporate business here, looking that it is slightly below target in recent years. So I'm just wondering whether you expect to pick up in this business. Thanks.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Sheel, appreciate it. So, Katie, I'll talk generally about cost. You maybe want to come in around the outer years on costs.

[Katie Murray, CFO at NatWest Group]

Sure.

[Paul Thwaite, CEO at NatWest Group]

I'll cover the CAL piece as well. Sheel, on the first of all, I'd say we're very pleased with the momentum in the cost line. Obviously, a nearly 5% reduction in the cost-income ratio this year. That's 20%+ over the last four years. It feels like we've got a really good flywheel going in terms of driving out efficiencies and productivity in the business, reinvesting some of that capacity, but making the bank more productive and more efficient going forward. In terms of your question around what levers are we pulling, it's a really broad range of levers, I would say. A key part of it is the kind of historic and current tech investment that's driving a lot more digitization, automation. We continue to decommission a lot of applications.

[Paul Thwaite, CEO at NatWest Group]

We've consolidated a lot of platforms, so that's really helping. We've also become a lot more efficient in how we do change. You know, we talk about that in the presentation, GBP 100 million of benefits. So in effect, we can do more change at lower cost, which is great for the customer, but also great for the cost outlook. And we're also continuing to simplify the business more generally, Sheel. So property consolidation would be one, organizational simplification, legal entities, et cetera. So there's a whole range of costs that, a whole range of levers, and that's why for 2028, we've said less than 45%, but we still, and we see opportunity beyond that because we're very comfortable that this flywheel is heading in the right direction. Katie?

[Katie Murray, CFO at NatWest Group]

Sure. Thanks very much. So look, Sheel, as I looked through it, obviously, operating costs, GBP 8.2 billion in financial year. It's very much as Paul says, it's the ongoing cost savings that we have, the higher investment spend on data and tech, and the kind of as well as the higher business transformations and the benefits that we're seeing on that. We do expect you, you wouldn't be surprised to hear me say, to continue our really cost-tight management as we go out into 2028 and really ensure that we're getting the benefits of that in investment spend and that they are realized. We do expect positive jaws in each year. We've brought in the cost-income ratio target of below 45% versus the very strong 48.6% we've already printed for 2025.

[Katie Murray, CFO at NatWest Group]

That target does include, the costs and, of course, income from Evelyn Partners, including our ongoing investment in that business. I would say, if I had to look beyond 2028, I would expect to see further improvement in that, in that ratio from here as well. As ever, a very tight cost picture.

[Paul Thwaite, CEO at NatWest Group]

Great. Thanks, Katie. And then, Sheel, on your second broader question around CAL or customer assets and liabilities. We're not going to give you the exact; you probably don't expect it, the exact kind of split of growth, but what I'd encourage you to think about is we're very confident about growing across all aspects of CAL: lending, deposits, assets under management. Given it's a three-year cycle, we're going to push hard to grow where the opportunities present themselves. Obviously, the environment will change, so different opportunities will be attractive at different times. I do think it's reasonable to expect that some areas will grow faster than others. You know, if you look, as you alluded to, if you look at, like, our growth over the last couple of years, assets under management have typically, you know, grown at a higher CAGR.

[Paul Thwaite, CEO at NatWest Group]

So, you know, 12% on average over the last seven years. Evelyn will obviously accelerate that, given the compound growth in that business of 7%. On lending, I'd say a broader picture, Sheel, very confident we capture—I mean, historically, NatWest is a lending and credit franchise, and we can capture demand when it's there. So I'd expect to see the lending growth across mortgages, so retail, unsecured, but also, as you can see the growth in the commercial institutional lending book in 2025, you have GBP 14 billion, up 10%. So we're not going to give you the breakdown, but I would plan across both lending, deposits, and AUMA, and we're very confident that it'll be greater than the 4% each year target for 2028.

[Sheel Shah, Executive Director at JPMorgan]

Thanks.

[Operator]

Our next question comes from Benjamin Cavan Roberts of Goldman Sachs International. Benjamin, if you'd like to go ahead and ask your question.

[Benjamin Cavan-Roberts, VP at Goldman Sachs International]

Morning, guys.

[Katie Murray, CFO at NatWest Group]

Hey Ben.

[Paul Thwaite, CEO at NatWest Group]

Hey Ben.

[Benjamin Cavan-Roberts, VP at Goldman Sachs International]

Thank you very much for the presentation and the questions. Just wanted to ask a first one on profitability and a second one on the hedge.

[Paul Thwaite, CEO at NatWest Group]

Mm-hmm.

[Benjamin Cavan-Roberts, VP at Goldman Sachs International]

So if we look at the 19% return on tangible in 2025, I know there were a few factors which helped that result, including very low impairments, strong markets result, higher average bank base rate than likely in future years, and a slightly lower effective tax rate than is modeled by consensus for the medium term. But aside from those, what, what would you call out as factors that you might see as being less favorable year-over-year in 2026, or elements of conservatism that effectively contributes to the sequential decline in ROTE on the lower end of your 2026 guidance? Put differently, is it fair to think of underlying ROTE as continuing to go up from here?

[Benjamin Cavan-Roberts, VP at Goldman Sachs International]

And then secondly, on the hedge tailwinds through to 2030, has anything changed in the structure, duration, or notional assumptions of the hedge to facilitate that very strong uplift in 2026 and 2027, and then the continued uplift through to 2030? Thank you.

[Paul Thwaite, CEO at NatWest Group]

Good. Thanks. Thanks, Ben. Katie?

[Katie Murray, CFO at NatWest Group]

Sure.

[Paul Thwaite, CEO at NatWest Group]

Either order.

[Katie Murray, CFO at NatWest Group]

Yeah, no, absolutely. So I'll start off with ROTE. So obviously, looking to our ROTE guidance of greater than 17% in 2026, you can see that we've got a high, a record of high teens % returns in there. So I wouldn't get too focused on the underlying versus this and that kind of coming in. We're very confident on delivering on this guidance. You know, we did have a little bit of a boost in the year, but things come in at different points. We. I think the important thing to remember is that we will continue to build capital, both through this year as we get to the end of 2026, with Basel 3.1 coming in on January the first. That's an extra GBP 10 billion of regulatory capital along there.

[Katie Murray, CFO at NatWest Group]

And then alongside our PNL guidance, you should expect that average growth coming through on the tangible equity as well, which kind of is what pulls your ROTE back a little bit. It's important not to, not to, not to forget that. We're obviously also guiding you on the strong capital generation that we can see coming through. And there will be the movement during the year of 130 bps as we have CET1 coming in. But overall, I guess as I, I, I look at the number, there's not one thing I would say, Oh, look at that as a, as a negative or, or a, a drag particularly, but I, I would encourage you to think of CAL growth and how it feeds through to the, the TNAV growth.

[Katie Murray, CFO at NatWest Group]

If I then kind of take you on to the hedge in terms of of where we are and the kind of how it's kind of structuring as we go forward from here. Look, when we look at the hedge, you know, there's a number of different things that we kind of bring into that. One of the debates we've been having is around that hedge duration and what we've been looking at. We are very stable at 2.8 years. It's important to reflect, to remember that that reflects the product hedge at 2.5 years, and the equity hedge at five years, which is obviously five and 10 in kind of duration.

[Katie Murray, CFO at NatWest Group]

We spend a lot of time looking at the behavioral life of different deposit types, different cohorts across the deposit franchise of our three businesses. We're very happy to see the deposit stability and the growth over this last year. We look obviously backwards, but we also look forwards in terms of what we're expecting there, and we give consideration of how things might evolve in the future as we go forward from here. So conversations you'd expect us to be having around things like digital currencies, stable coins, tokenized deposits, as well, of course, the absolute competition that we see in that, this market. We continue to, you know, dynamically monitor that and assess that over time and how we reinvest the, the hedge at the different lifetimes.

[Katie Murray, CFO at NatWest Group]

I think the other thing that's important, that I'm not sure you all think about enough as well, is also the relative size of both of those hedges, you know, in terms of how they sit and what that then does to your kind of this averaging out of the age of the hedge. I'd say one thing in addition, we do review our hedging instruments. You know, as gilts have repriced, we have actively been reinvesting our maturing 10-year swaps into 10-year gilts, which provides a pickup in yields. That contributed about GBP 50 million additional income from the equity hedge in 2025. Very comfortable with the approach we have.

[Katie Murray, CFO at NatWest Group]

While it feels kind of mechanistic and we talk about it as that a lot, it has a huge amount of thought that goes in the background to make sure we deliver the really quality returns that you see coming from this hedge year after year. Thanks, Ben.

[Benjamin Cavan-Roberts, VP at Goldman Sachs International]

Very helpful. Thank you.

[Paul Thwaite, CEO at NatWest Group]

Thank you, Katie. Thanks, Ben.

[Operator]

Our next question comes from Rob Noble of Deutsche Bank. Rob, if you'd like to go ahead and unmute and ask your question.

[Rob Noble, Banks Analyst at Deutsche Bank]

Morning. On Evelyn, did you look at anything else in the space as a potential acquisition? There are listed wealth managers that trade at lower multiples. So what makes this specific one worth a premium compared to others? If I could ask about AI as well. There's been a rout in the market this week in wealth managers, and then more generally across the last kind of few months. Could you talk specifically about the risks from AI in this space? And then if we could broaden it out to traditional banking, what risk do you see from AI on deposit spreads in particular, or any other material risk that you see in banking from AI as well? Thanks.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Rob. So we got Evelyn, AI in wealth, and then more broadly on, on, I guess, AI impact on banking. Okay. The first question, as you'd expect, Rob, you know, we monitor a number of participants and actually have done for a number of years. As you alluded to, there's private entities, there's listed entities, there's different business models. In terms of Evelyn, we absolutely thought it was the right fit for NatWest. Very strategic acquisition creates in one fell swoop, the number one combined private bank and wealth manager in the U.K. It transforms our wealth business, increases the scale of it, you know, 2x from an assets under management perspective. And most importantly, or as importantly, it brings key capabilities that will complement our proposition.

[Paul Thwaite, CEO at NatWest Group]

A direct-to-consumer platform, Bestinvest, the largest employed financial advisor network in the U.K., and a broad suite of investment products and propositions. So it was the combination of the scale, Rob, but also the capabilities that it brings, and it positions us, I think, excellently for what is obviously going to be a growth area over both the short, medium, and long term. We know that customer demand is increasing around financial planning, financial advice. As you see, intergenerational wealth transfer, that's only going to increase. I think it's an area that's going to be amplified by tech and AI, and I'll come back to that because I think it's going to make advice more accessible and more affordable.

[Paul Thwaite, CEO at NatWest Group]

It's obvious we have helpful regulatory tailwinds as well, whether that's the FCA's Advice Guidance Boundary Review, whether it's the targeted support developments, which will drive advice to more people that start in April. For us, it felt like the right partner, the right capabilities creating a really substantial private bank and wealth management to complement the number one business bank we have. In terms of the broader picture on AI and wealth management, that's been on our minds for banking. It's been on our eyes, you know, it's obviously been on our minds in the context of wealth as we thought about the wealth space over the last couple of years. I actually think the winners in the wealth space in respect of AI will be those who have scale and have data.

[Paul Thwaite, CEO at NatWest Group]

When you think about 20 million customers that NatWest has, you know, that's 200x the times of Evelyn. So the ability to use that scale and data, I think AI is a big accelerant and opportunity. Secondly, what all the customer research and customer insight tells us, both independent and our own, is that the winning combination is gonna be a combination of, I guess, AI-driven digital wealth advice, but also expertise through humans and people for those big financial decisions, the complex aspects of financial planning. So to me, you bring both together, you see AI really helping us get closer to our existing customers in the wealth space, which is great, but also access new customers at relatively low marginal cost. But then combined from a hybrid perspective with excellent advisors for the more complex financial needs.

[Paul Thwaite, CEO at NatWest Group]

So that's how we think about it. So we've net-net, we think AI will be an accelerant and a winner, and we'll be a winner in terms of our wealth aspirations, and we think the customer need is really this hybrid need. And then more generally on AI, I mean, it's already affecting the sector. You know, we've embraced it, that's from a colleague perspective and a customer perspective. I think it's gonna change how customers engage with us or how they find us and discover us. I think what it plays to is, again, my point around scale. I think the winners here will be those who've got significant size customer bases, 20 million for us, a long-standing relationships, data. So you can bring products, propositions, whether directly to your own channels or through other channels.

[Paul Thwaite, CEO at NatWest Group]

I think that's who's gonna be successful, and we're very thoughtful about that in terms of how we're building our capabilities. Hope that gives you a, quite a big picture on all those big topics. Thanks, Rob.

[Rob Noble, Banks Analyst at Deutsche Bank]

Thank you.

[Operator]

Our next question comes from Amit Goel of Mediobanca. If you'd like to unmute and ask your question.

[Katie Murray, CFO at NatWest Group]

Hey, Amit!

[Paul Thwaite, CEO at NatWest Group]

Hey, Amit.

[Amit Goel, Research Analyst at Mediobanca]

Hi, thank you, and thanks for taking my questions. So the first question is just on the broader capital generation targets. So one, just more of... well, part of it's just a clarification. When we talk about the circa 200 bps for 2026, I guess, does that exclude the Basel 3.1 effect, which comes first of January 2027, or is that in there? And more broadly, just looking at the 2028 capital generation target, you know, greater than 200 bps, I'm just curious, it seems to be, you know, on the low side, especially if I think about the kind of ROTE target greater than 18%.

[Amit Goel, Research Analyst at Mediobanca]

So, you know, just if you can talk to, you know, your ability to meet or beat or how you reconcile the two. And then just, the second question, just a shorter follow-up, but when we talk about the circa 13% CET1 target going forwards, is that a level where you'd be happy to operate, you know, one quarter or the other quarter with a 12 kinda handle starting point, or is it basically you look to be at 13%+ throughout your kind of operating period on a quarterly basis?

[Paul Thwaite, CEO at NatWest Group]

Thanks, Amit. So let me knock two of them off pretty quickly. So on the, cap generation, yes, it excludes the first January 2027 increases from Basel 3. So hopefully that gives you the clarity there. We've also said that we, we believe that will be around circa GBP 10 billion. So, X is the answer there. On the third question, or the follow, or the kind of sub-question on, on CET1 and 13%, obviously, we've been thinking, we've been thinking about that for a couple of years. It's around 13%, so the way I, the way I would think about it is, it's not, it's not a hard floor, so that's the way to think about it. And then on the broader question of, 2028 and capital generation, a couple of things.

[Paul Thwaite, CEO at NatWest Group]

One is, it's important to remember it's on a growing balance sheet, so it includes the growth that we've talked about. So please bear that in mind. And I guess just a bit of context, obviously, you can see 19% ROTIE this year. You can see the capital generation at, you know, above 250 basis points. That's our third year of, you know, greater than 17% ROTIE. It's on a balance sheet that continues to grow, so at the compound rate, and we need to, you need to bear that in mind when you think about capital generation going forward. And that obviously flows through to EPS, DPS, and higher TNAV for sure. So that's how I would, that's how I would, how I would think about that, and as ever, you know, we're very clear.

[Paul Thwaite, CEO at NatWest Group]

You know, our target is, you can see how we position our targets. You know, the intention for 2028 is to be greater than 200 basis points. Hopefully, it gives you a good picture. Thanks.

[Amit Goel, Research Analyst at Mediobanca]

Thank you.

[Operator]

Our next question comes from Christopher Cant of Autonomous. Christopher, if you'd like to unmute and ask your question.

[Katie Murray, CFO at NatWest Group]

Hey, Chris.

[Christopher Cant, Head of Banks Strategy at Autonomous]

Hey.

[Christopher Cant, Head of Banks Strategy at Autonomous]

Good. Thanks for taking the questions. If I could ask one on RWAs, please.

[Paul Thwaite, CEO at NatWest Group]

Yeah.

[Christopher Cant, Head of Banks Strategy at Autonomous]

So really pleasing to hear the detail around how you're expecting to grow. I think that's an important part of the story, but obviously, you're now talking about this CAL concept for growth, which makes it quite hard for us to think about the capital intensity of growth. Obviously, capital intensity of AUMA or deposits within that number, quite different to lending growth. Given us this new guide on the Basel for RWA impact, which I think is probably a bit above where consensus was. So if I could just invite you to comment on the consensus RWA expectations, I think we're at 2023 and 2028. That would be appreciated, just so we can sort of understand how you're thinking about the RWA piece of the puzzle. And then on rates assumptions, please.

[Christopher Cant, Head of Banks Strategy at Autonomous]

Your base rate assumption is 3.25% flat. Fair enough, as a planning assumption. Could I just understand what reinvestment rates you're assuming on the hedge within those gross income increments you've given us? Given the flat base rate assumption, I assume you're assuming a fairly flat swaps curve or a reasonably low reinvestment rate. Thank you.

[Paul Thwaite, CEO at NatWest Group]

Very clear, Chris. Thanks. Katie?

[Katie Murray, CFO at NatWest Group]

Sure. Thanks very much. So if I deal first with your kind of RWA outlook kind of point. I guess as we look ahead, in 2026 has obviously been. It's underpinned by the disciplined balance sheet growth that we've got, the increase in regulatory clarity, as well as the kind of further active kind of management. But the primary driver will be the lending growth. One of the slides we have included in the appendix pack is, I think, on slide 57, a bit of a detail on risk density to show you that the risk density of lending is stable. However, the volume will increase, so therefore, your volume of RWAs will follow through in that. And so you need to kind of bear that in mind as you go through.

[Katie Murray, CFO at NatWest Group]

There could still be a couple of small additional impacts from CRD4 in 2026. We think that's largely done, but obviously, our models are in that final stage of the PRA, and there can be a little bit of movement as you get them kind of finalized. I would also expect to see some further RWA management. I would say we've had a really stellar year this year on RWA management, so I wouldn't necessarily pop that number into your model at quite that kind of high level, but it's something you will continue to see as you move forward from here. You know, and then if I go to the hedge, and in terms of that kind of reinvestment yield that we see. Like, as you know, we talk a lot about the tailwind that's coming through on the hedge.

[Katie Murray, CFO at NatWest Group]

If I look at our current economic assumptions, there's in the five-year average swap reinvestment rates, 3.5% in terms of the product hedge and the ten-year gilt reinvestment rate of 4.5% over the next five years. So we do expect that hedge to deliver on an annual year-on-year tailwind into 2030. The second thing you need to think about as well is not just those rates, but also the size of the hedge. You know, we are assuming an increasing notional balance coming through, so we're GBP 198 billion in 2025. We expect that to grow to GBP 200 billion in 2026, and then I expect it to grow steadily as we move forward to 2030, supported by that CAL growth.

[Katie Murray, CFO at NatWest Group]

Obviously, some of that will be going into the hedge-eligible deposits, and others will be into the increasing size of the equity hedge. Now, Chris, you, if you were standing with me, you'd probably say, "Katie, those rates feel a bit low. If I were to mark them today, they'd be a little bit higher." That's a fair statement, and I kind of accept that. However, kind of sitting where we are today, I'm comfortable with the rates for our base assumption. You know, we'll see that as it comes through. But overall, we are really confident of this tailwind that we see coming through on the hedge in the next couple of years, but also all the way out to 2030. Thanks very much, Chris.

[Christopher Cant, Head of Banks Strategy at Autonomous]

Thanks, Katie.

[Christopher Cant, Head of Banks Strategy at Autonomous]

Thank you.

[Paul Thwaite, CEO at NatWest Group]

Thank you, Chris.

[Operator]

Our next question comes from James Invine of Rothschild & Co Redburn. If you'd like to go ahead and ask your question.

[James Invine, Equity Analyst at Rothschild & Co Redburn]

Hi, good morning, Paul. Good morning, Katie.

[Paul Thwaite, CEO at NatWest Group]

Hey, James.

[Katie Murray, CFO at NatWest Group]

Good morning.

[James Invine, Equity Analyst at Rothschild & Co Redburn]

I got a couple, please. The first is on the guidance. So I mean, if we... Sorry, the revenue guidance, that is. So if we start with your GBP 16.4 billion revenue that you printed for last year, you guided to the hedge being an extra 1.5, so we're up to GBP 17.9 billion. There's decent balance sheet growth, so that, that's another tailwind for that. I know you've talked about Bank of England rate cuts, but I think from what I can see, the second one only comes right at the end of the year. So I was just wondering, what other headwinds you've got kind of factored into the 2026 revenue growth, please? And then the second one is just on costs.

[James Invine, Equity Analyst at Rothschild & Co Redburn]

Paul, I think on one of your slides, you talked about doubling the number of coders to 12,000-

[Paul Thwaite, CEO at NatWest Group]

Mm-hmm

[James Invine, Equity Analyst at Rothschild & Co Redburn]

But also that AI is now writing about a third of their code. So, you know, from here, what are you expecting for where that number of coders needs to go? I can see, you know, reasons for why it might go up a lot, but also why it might come down a lot. So I'm just wondering what your view is, please.

[Paul Thwaite, CEO at NatWest Group]

Great. Thank you, James. Do you want to take income 26, and I'll take.

[Katie Murray, CFO at NatWest Group]

Yeah, sure. Let me kick off. Thanks, James. So as we look at that kind of guidance, 17.2-17.6, look, we're very confident on it. We will deliver in that range. And if you look at it, what we will be delivering is a kind of 5%-7% top-line growth. So very good. Let me help you a little bit on a little bit of your maths, there's a couple of things within there. First of all, and the most important thing in reality, is customer activity. You know, and where we kind of land in that range is going to be very dependent upon that kind of activity, I would say.

[Katie Murray, CFO at NatWest Group]

But we have a strong, multi-year track record of growth. You can see the growth we're talking about this morning, what we've delivered in 2025, and we'd expect that to continue as we move into 2026. Obviously, the mix will ultimately contribute into the income contribution. You're aware, and we may talk about it more this morning as well, the little bit of pressure that there is on mortgage margins at the moment. We talked about that at Q3, and there's also some continuing competitive pricing going on in the savings products. The second bit is on rates. Two rate cuts, they're actually penciled in my forecast in April and October, so Q2 and Q4, as they come through, so they will have a little bit of an impact.

[Katie Murray, CFO at NatWest Group]

However, I think you've also got to remember that we're not at the start of the rate-cutting journey, we're quite some way through it. So if you think of our sensitivity, we give you, we give you year one, we give you year two, and year three. The way I think about that number, it's a kind of GBP -500 against that positive of the hedge coming through, because you've just got the cumulative effect of those rates coming through. So I would, I would bring that in. And the third thing I would think about, you heard me talk already about the RWA management action. They do come at a cost, and as I look into 2026 numbers, I would say the cost, additional cost of the RWA actions that we've done, would be an extra kind of GBP 100 million as well.

[Katie Murray, CFO at NatWest Group]

So I would take, I would take that off, and that, that will get you very nicely into the range, that we're, we're talking to you about the 17.2-17.6, and it's, you know, we're, we're very confident that we're gonna be able to deliver that. So thank, thanks, James. Hopefully, that, that helps. Paul, should I hand back to you?

[James Invine, Equity Analyst at Rothschild & Co Redburn]

Thanks, Katie.

[Paul Thwaite, CEO at NatWest Group]

Shifting gear to a quite, quite a different topic. I guess engineering and productivity of software engineering, James, is something we spend a lot of time on as a management team. It's definitely a topic du jour, and it's pretty obvious the, you know, the AI developments have been transformational for us. All our engineering and coding teams have got access to AI tools. As you alluded to, we have around 12,000 engineers, and that's been increasing over a number of years. But now we're at a situation where, you know, circa 35% of the code is written by AI. So I think over time, there will be choices around how you use that capacity. I think it's still an evolving picture.

[Paul Thwaite, CEO at NatWest Group]

We've got a couple of quite exciting pilots running in two of our businesses, in our international business and also in our financial crime area, where we're, I guess, what we call doing fully agentic press play software, and that's actually delivering 10x productivity gains. So that's where you've got agentic workflows, autonomous agents, you know, they're planning, building code, testing code, but obviously then overseen in a responsible way by a human. So this, this space is, I think, you know, exploding pretty quickly, and I think it's inevitable there'll be a, a change both in the, in, in the profile of, let's call it engineers, in terms of the activities that they do, and then I think there'll be some choices about how you capture that productivity benefit. Do you capture some of it to go faster?

[Paul Thwaite, CEO at NatWest Group]

You know, deliver more products and services to your clients and enhance the customer proposition, or do you also see opportunities for, you know... do we also see opportunities for productivity and efficiency? And I think all other things, things being equal, you know, that's a reasonable expectation over the short to medium term, that there'll be some productivity and efficiency opportunities moving forward. Hopefully, that gives you a flavor for it, but very excited by the work that's going on there. But we are very mindful that we're a regulated industry, and we're doing it in a very responsible and thoughtful way. Thanks, James.

[James Invine, Equity Analyst at Rothschild & Co Redburn]

Lovely. Thanks, both.

[Katie Murray, CFO at NatWest Group]

Thanks, James.

[Operator]

Our next question comes from Aman Rakkar of Barclays. Aman, please go ahead.

[Katie Murray, CFO at NatWest Group]

Hey, Aman.

[Aman Rakkar, Senior Equity Analyst at Barclays]

Hello. Hopefully, you can hear me, both.

[Paul Thwaite, CEO at NatWest Group]

We can hear you clear.

[Aman Rakkar, Senior Equity Analyst at Barclays]

Thank you so much. I had a question actually back on Evelyn. So, yeah, I, look, I guess the market reaction to Evelyn's been what it is and coming in a backdrop of broader crosscurrents. But, the feedback I've been getting is around potential execution risk around the deal.

[Paul Thwaite, CEO at NatWest Group]

Mm-hmm.

[Aman Rakkar, Senior Equity Analyst at Barclays]

So I was kind of interested in your take around your comfortability, your confidence and your ability to kind of integrate this business and also extract value from it. You know, if you could bring a bit more to life around perhaps the revenue synergy, you know, and the degree of confidence that you have, that in two years' time, we're gonna be looking back and thinking, "This is a good deal." And the kind of related question is a repeat of a question from earlier this week, but could you... can you help us with your assumptions around attrition? I think that is potentially a key unknown variable here.

[Aman Rakkar, Senior Equity Analyst at Barclays]

How are you thinking about attrition risk in the, investment practitioners, and what kind of strategic actions are you gonna have to take to ensure that, you know, that your, your staff, but also your customers, kind of don't leave? If you could help us with that, I think it would really help. Thank you.

[Paul Thwaite, CEO at NatWest Group]

Great. Thank you, Aman. So, let's start with integration, and then I'll come on to revenue synergies, and then we'll talk a little bit around, I guess, the value creation and ensuring we retain both critical people, but also customers. On integration, very high confidence, Aman. We've known the business and tracked the business for a number of years. We know people, obviously, we know people in the business, so we know Evelyn very well. We've undertook quite extensive due diligence around it, whether that's the tech platforms, whether that's the cultural alignment. There's been a lot of investment since the, I guess, original combination of the business in 2020 into the tech capabilities. We've seen that, to all intents and purposes, the tech and op integration is complete.

[Paul Thwaite, CEO at NatWest Group]

The benefits of those investments are actually now coming through for Evelyn. There's a lot of congruence and alignment between the underlying platforms that our Coutts business use and Evelyn uses. That gives us confidence about, we know the platforms, we know the systems, we have experts on both sides of the transaction who know those platforms and systems, so we feel very confident about that. And what we also have on both sides of this transaction, you know, we have experienced people who've done M&A transactions and integrations. We've got our very recent experience, and the team's still on the park around the Sainsbury's acquisition. We've complemented that over the course of the last twelve months with individuals that who've been involved in some really significant FS M&A activity over the course of the last 12 months.

[Paul Thwaite, CEO at NatWest Group]

Obviously, given Evelyn, Evelyn's history, they've built experience there as well, having to integrate different businesses. So we feel pretty confident around that, that, what I call that alignment around integration and the ability, net-net, to create a lot of value out of that. So that's integration, high conviction, high confidence. On revenue synergies, I guess we could talk a long time about that. Big picture, though, I think the really critical thing to remember here is there's a really big opportunity in getting and helping a lot more people to save and invest for the future. We've got these regulatory tailwinds, which you know about, the financial advice gap. And we also know that in the wealth industry, despite the historic kind of cautious investment culture, we've seen mid- to high single-digit growth in AUM.

[Paul Thwaite, CEO at NatWest Group]

If you look at our own business, we've seen 12% compound growth, you know, in assets under management. If you look at our 2025 performance, 20% growth in AUMA, net new money of 8.4%. So that's the big picture that gives us, I guess, I, I guess, a sense of confidence. If you look at the drivers of income growth, you look at Evelyn's track record, over 7% since 2023 in terms of AUMA growth. And then, on top of that, we've got the revenue synergies. So where do they come from? Three big opportunities. Bestinvest, it's a really significant upgrade to our NatWest Invest digital platform. We have the opportunity to bring that to life for our 1.2 million Premier customers and our 19-20 million customers in retail.

[Paul Thwaite, CEO at NatWest Group]

The breadth for the Bestinvest offering versus our current offering is incomparable. At the moment, NatWest Invest has five funds. You've got 3,000 products with Bestinvest, 19 funds versus five funds, access to US equities, UK equities, ETFs, investment trusts. Plus, we have a relationship with those 19 million customers and the ability to surface these opportunities through the app. So that's the first big kind of, let's say, opportunity. Then you look at the excellence that Evelyn has in terms and the scale it has, in terms of financial planning and the biggest advisor employed advisor network in the country. Again, we can bring that to our 1.2 million Premier customers. We can bring that to our high-net-worth customers in Coutts.

[Paul Thwaite, CEO at NatWest Group]

Again, the breadth of the proposition really adds to the, I guess, the wealth waterfront that we have in our Coutts business and 2x in terms of our Premier business. And then the third synergy is obviously, if you look at what Coutts has, you look at what NatWest has, we have a range of banking products, lending and banking, that we can bring and support Evelyn clients with. So you don't have to make very. When you work it through, as I'm sure you have, Aman, you know, you don't have to make very big assumptions to see where the opportunities are, both in the underlying growth rate of the business, but also in the revenue synergies and opportunities that there are.

[Paul Thwaite, CEO at NatWest Group]

That's why we're, we're very high conviction on this from a strategic perspective, and very high conviction that the value creation in both the short term and long term will be significant. Thanks, Aman.

[Operator]

Our next question comes from Jonathan Pierce of Jefferies.

[Paul Thwaite, CEO at NatWest Group]

Jonathan Pierce.

[Operator]

Jonathan, please go ahead.

[Paul Thwaite, CEO at NatWest Group]

Oh, Jonathan, can you hear us?

[Jonathan Pierce, Equity Analyst at Jefferies]

Hello.

[Paul Thwaite, CEO at NatWest Group]

Oh, yeah, yeah.

[Jonathan Pierce, Equity Analyst at Jefferies]

Hello. Got two questions, please. Apologies if I've missed an answer on this already. I've had a few issues this morning. The first is on tangible equity. Really looking at consensus out to 2028, there's lots of moving parts, I guess, here, versus what consensus might have been thinking before. So Evelyn, which sit down, lack of buybacks, push it back up, you know, talking about a bit more growth than people had in. The GBP 33.4 billion of average tangible equity consensus has in 2028, how are you thinking about that? Is that an appropriate number to be applying the greater than 18% to, or, or, or could that be a bit than that? That's the first question. The second question is on the hedge.

[Jonathan Pierce, Equity Analyst at Jefferies]

Can I just confirm that I heard correctly on the equity hedge, that you're now showing the income from the equity hedge as though it was invested in 10-year gilts rather than 10-year swaps? As that obviously is going to give you a better yield and a better tailwind than if it was swaps. You've obviously dropped the disclosure on the maturity yield on the product hedge. I just want to get a sense as to what that is in 2028, please, because, you know, obviously, if the notional is growing, all else equal, that the hedge income is gonna grow, but I'm not sure that is a sort of underlying feature. What's the maturity yields, please, on the product hedge in 2028? Thanks.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Jonathan. Katie?

[Katie Murray, CFO at NatWest Group]

Sure. Thanks very much. Morning, Jonathan. So if we, as we look, first of all, at the kind of the TNAV question, I think it's been important to look at the kind of the Evelyn versus share buyback and things like that. Evelyn was a capital allocation conversation as far as we're talking about in terms of TNAV. So actually, it has no impact on your 2028 TNAV. And by that, I mean, if we hadn't done Evelyn, we'd distributed the capital, 'cause our belief is to distribute excess share capital to you. So it was already out of that TNAV calculation. When you think of the TNAV, it's really CAL you've got to think about, and within there, obviously, specifically, loan growth.

[Katie Murray, CFO at NatWest Group]

There's a little bit of unwind of the cash flow hedge, but if you think of our loan growth that we've done over the last number of years, you know, we've been consistently above 4% within there. I could use that as a good proxy for TNAV if I were you. So therefore, I would say, as I look at my number versus your number, and I do try not to compare myself to consensus, I would probably guide you to that 4% a little bit and kind of lift it up a little bit as you go through. I know you're absolutely right as well.

[Katie Murray, CFO at NatWest Group]

If I move on to the, onto the hedge, we have over, this last while, as we look as part of our kind of, you know, management of the hedge, just to sort of say, where are our opportunities? And so we, we have moved, some of our equity hedge into gilts, and so because we felt we were getting a better return there, and we can absolutely see that return coming through in terms of the.

[Katie Murray, CFO at NatWest Group]

The extra GBP 50 million that we report within there. You know, the equity hedge is GBP 25 billion in size. It's not by any means all in gilt, something we've just started to do relatively recently, but we'll continue to, we expect to move, to continue that move as we see the kind of gilt return being that bit better than the swap return. We're not particularly constrained on the size of that. I would discourage you from then saying, well, they'll start to do that on the credit hedge. With the product hedge, we won't, just because it's a very different beast. We've got a lot of natural kind of product offset that we see within there, but it definitely is helpful to us in terms of that delivery.

[Katie Murray, CFO at NatWest Group]

Jonathan, I'm going to disappoint you a little bit and not give you the numbers that I've chosen not to disclose this morning. But you, you can sort of see that what we have given you is that combined yield. We've also given you the, the numbers as we, as we go through. I know that one of the questions that has been going around is around actually that redemption yield and what it looks like specifically in 2028. So if I look at the kind of 2028 redemption yield for the structural hedge, it is slightly below 4%. Currently, we do see 2028 as a kind of peak. I know it's always a favorite analyst term, the kind of peak redemption yield level, but we see that falling then into 2029 and 2030.

[Katie Murray, CFO at NatWest Group]

I would say it's the only year that we do see that the redemption yield being above our reinvestment yield, and the difference is probably 30-40 basis points on that number. However, I think really importantly, there is a reason that we don't worry about this. It's more than offset by the compounding benefit of the hedge reinvestment over 2026 and 2027, and of course, the expected increase in our hedge nominal over the period, again, in line with our call guidance. And that's just why we are really comfortable about this annual income tailwind that we see through to 2030. I hope that helps you without giving you the exact numbers you're maybe searching for.

[Jonathan Pierce, Equity Analyst at Jefferies]

Yeah, it's very clear. Thank you very much.

[Katie Murray, CFO at NatWest Group]

Thanks.

[Jonathan Pierce, Equity Analyst at Jefferies]

Thanks, Jonathan.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Katie. Thanks, Jonathan.

[Operator]

Our next question comes from Guy Stebbings, from BNP Paribas. If you'd like to go ahead and ask your question.

[Guy Stebbings, Executive Director of European Banks Research at BNP Paribas]

Hi, good morning.

[Paul Thwaite, CEO at NatWest Group]

Hey, Guy.

[Katie Murray, CFO at NatWest Group]

Hi, Guy.

[Guy Stebbings, Executive Director of European Banks Research at BNP Paribas]

Hi there. The first one was coming back to the income guide for 2026, but refocusing on net interest income. I mean, I appreciate you don't spit out the guidance as such, but if we think about non-interest income, perhaps broadly similar to 2025, maybe a bit of growth as per consensus, so sort of a ballpark GBP 3.6, then it looks like you're thinking about an NII around GBP 13.6-GBP 13.9.

[Guy Stebbings, Executive Director of European Banks Research at BNP Paribas]

Q4, you're already sort of analyzing within that range, just so I just want to check, is that the right way to think about it, and you're not really anticipating a lot of NII growth versus the Q4 annualized run rate, and that rate cuts, I guess, less loss in NII from SRTs or mortgage spread compression could, you know, almost fully offset, the hedge and volume growth. Feels a touch conservative, so I just want to check my thinking there. And then on rate sensitivity, you're now talking to an increase to GBP 157 million on the managed margin sensitivity. I think that's still a 60% deposit pass-through.

[Guy Stebbings, Executive Director of European Banks Research at BNP Paribas]

I appreciate for competitive reasons, you're not gonna say, you know, exactly what you're assuming in the future, but, but maybe you could talk about how that's, that's trended, in particular, in terms of the December rate cut. And I'm not sure, Katie, you mentioned something about a buildup of rate sensitivity as time progresses. I'm not sure if that was sort of related to this point or something else, so perhaps you could elaborate. Thank you.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Guy.

[Katie Murray, CFO at NatWest Group]

Thanks, Guy.

[Paul Thwaite, CEO at NatWest Group]

Katie.

[Katie Murray, CFO at NatWest Group]

If I miss any of them, Guy, come back in, forgive me. So I guess as we look at the interim guide, income guide, first, my first guidance would be, and you've heard me say this before, try to look at the three businesses. You remember that in the center, we've had a lot of sort of movement between non-interest income and NII, and that kind of does kind of take and confuse it a little bit.

[Katie Murray, CFO at NatWest Group]

We talked a little bit about Q3, that we put in some hedge accounting to help resolve that, and what you will see as we go through the next few quarters is you won't see those big flips kind of going from NII to non-NII, which is why I would say really look at the three businesses. We are confident on the momentum that we see in the underlying customer activity and the underlying momentum we have in the business, but we would expect to see non-interest income across the three businesses growing into 2026 from here as well. If I look then to the rate sensitivity, you know, we've issued new ones today.

[Katie Murray, CFO at NatWest Group]

The change in the amount is very much reflective of the size of the balance sheet as well. We work on a 60% pass-through. I would say broadly, when you look across a number of rate cuts, we're definitely in that sort of space as we come through from there. So that's not particularly changed, and I think that's a good proxy for you to continue to work on. And then I think your last point was very much around the income, and you've got this, what's happening on the rate sensitivity. So if you look to 2026 income, what we've got is the impact of the rate cuts that we had in 2025.

[Katie Murray, CFO at NatWest Group]

You'll now have a full annual impact of those. Then I've also got two rate cuts in 2026, April, October, as I said earlier. When I look at those and kind of do my kind of math on them, I kind of see them as a drag of GBP 500 million against the kind of income numbers that we've got through there. Obviously, going against the hedge, which is adding GBP 1.5 billion, so still strong growth, but that's why I was talking about in that part. It wasn't specifically on pass-through and things like that, or our traditional rate sensitivity disclosure. Hope that's helps, and I think I got it all.

[Paul Thwaite, CEO at NatWest Group]

Hopefully, we captured everything there, guys.

[Guy Stebbings, Executive Director of European Banks Research at BNP Paribas]

Great. Thank you.

[Operator]

Thank you. Thank you very much. Our last question today comes from Ed Firth from KBW. Ed, if you'd like to unmute and ask your question.

[Katie Murray, CFO at NatWest Group]

Hey, Ed.

[Ed Firth, Managing Director at KBW]

Morning. Yeah, thanks very much. Yeah, I had two questions for you. One was on detail. You mentioned that, that one of the reasons for the,

[Ed Firth, Managing Director at KBW]

I guess reasonably cautious, income expectations for 2026 was the cost of capital actions. I, I just wondered if you could give us roughly some idea of what, what sort of quantum you're assuming that, because obviously that was a big driver of risk-weighted assets in 2025. It would be helpful, and to get a guide for 2026, if that would be helpful. And then I, I guess the second question was, you in common with a lot of banks, you know, when we- you would put up your, the AI slides, and the tech slides, and lots of talk about 10x this, and massive reductions in that.

[Ed Firth, Managing Director at KBW]

And yet, when I look at the cost expectations for the sector as a whole, you know, the actual efficiency improvements in terms of cost to loans, cost to risk weight, they've barely moved in the last four or five years, and expectations are to be barely moving going forward as well, you know, a few basis points here and there. And so, I mean, are we ever going to get this sort of quantum shift in the cost of delivering banking that we're talking? I mean, we-- and I mean, not just like inflation or above, like, you know, in theory, the unit cost of delivering banking products.

[Paul Thwaite, CEO at NatWest Group]

Mm.

[Ed Firth, Managing Director at KBW]

Should go down massively with the digital delivery, and yet we don't ever seem to be seeing that. And so I'm just wondering, in your thinking, is there a time, like post 2028, when we can suddenly see this transformation? Or do we have to accept that, that actually you're just replacing cheap branch staff with expensive software engineers? Thanks so much.

[Paul Thwaite, CEO at NatWest Group]

Thank you, Ed. Okay, so we got.

[Katie Murray, CFO at NatWest Group]

Will I take the first.

[Paul Thwaite, CEO at NatWest Group]

I think you are taking, quickly do income, and then I'll.

[Katie Murray, CFO at NatWest Group]

Yeah.

[Paul Thwaite, CEO at NatWest Group]

I'll give my thesis on.

[Katie Murray, CFO at NatWest Group]

Yeah, no, thanks. Thanks, Paul.

[Paul Thwaite, CEO at NatWest Group]

Efficiency.

[Katie Murray, CFO at NatWest Group]

So, I mean, Ed, you'd expect me to say this, I would say to you that our 2026 income guidance is certainly very reasonable and not cautious. I think I've given you the math and all the building blocks as to how you can see that. In terms of the specific question on the cost of the capital actions, what I said earlier is you should think in your model of a negative GBP 100 in 2026 in terms of that additional cost. You know, they make great sense to do. You can see that we actually, in effect, paid for all of our lending with those capital actions, and that's taking off lower performing capital and replacing it with higher performing.

[Katie Murray, CFO at NatWest Group]

So we're really pleased with the performance of the business on that piece but think of it as an additional GBP 100 million. Paul, would you like to go deeper?

[Ed Firth, Managing Director at KBW]

Sorry, in terms of... I meant in terms of risk-weighted assets, what sort of reduction do you get for that GBP 100 million?

[Katie Murray, CFO at NatWest Group]

So in terms of that, so I think the numbers there is GBP 10.9 billion, was what we took off this year.

[Ed Firth, Managing Director at KBW]

Mm-hmm. Yeah.

[Katie Murray, CFO at NatWest Group]

I'm struggling to remember the number from the previous year, but I think it was around GBP 7 billion in that series, and that's the kind of level that we've seen. What you-- those are multi-year transactions, so some of that risk-weighted assets as such will roll into 2026. Obviously, there is a little bit of unwind within there, and then we'll do some further transactions in the year as well.

[Paul Thwaite, CEO at NatWest Group]

Thanks, Katie. Then, Ed, on your question around, I guess, unit cost over our assets, as different to or versus cost-income ratio, that's actually something as a management team we spend time on, 'cause we do think that's a very valuable and useful lens. I think you can see by the numbers we've shared today, the cost-income ratio has come down, part of that is income going up, but the reality is the absolute cost base has only gone up a little bit, you know, well below inflation, well below wage inflation. The targets we've set out, you know, imply, you know, less than 45%.

[Paul Thwaite, CEO at NatWest Group]

That makes us the most efficient large UK bank. So we, you know, by definition, our expectations are that, you know, costs will continue to be well managed, and I've signaled today, I think Katie said it as well, and we see opportunity, you know, beyond 28 to go beyond that. I do think there genuinely is a significant change going on, where you can see a business model and operating model that operates at a much lower cost base with a higher income base that drives, obviously, with greater returns on equity, but also we'll start to see the unit cost over assets, 'cause you've got the growth coming through reduced as well.

[Paul Thwaite, CEO at NatWest Group]

Time will tell where that plays out, but I think what we've laid out today, and I do believe we've got this flywheel of kind of cost efficiencies going well. Time will tell, but I do think we've got very good momentum in terms of improving the underlying kind of cost-unit cost base of the bank. So, as you say, I mean, we'll get there, but that's how I think about it. We use both lenses. Thanks, Ed.

[Operator]

Thank you for your questions today. I will now like to hand back to Paul for closing comments.

[Paul Thwaite, CEO at NatWest Group]

Yep, that seemed to go quickly, so thank you, everybody, for joining us for the second time this week. As you've heard, we've delivered a very strong performance in 2025, continuing our track record of growth on both sides of the balance sheet and fees. Very attractive returns for shareholders. Our total distributions for the year were GBP 4.1 billion. That includes the GBP 750 million share buyback we announced on Monday, alongside the acquisition of Evelyn Partners. That creates the UK's leading private bank and wealth manager, and we're very excited by that because it gives us another growth engine for the group. So hopefully, you've seen from today's numbers, we're ambitious for the business. We've set out new targets, and we're determined to deliver returns greater than 18% in 2028. Thank you. Have a good weekend.

[Operator]

That concludes today's presentation. Thank you for your participation. You may now disconnect.

Participants

Executives

• Katie Murray, CFO
• Paul Thwaite, CEO

Analysts

• Aman Rakkar, Senior Equity Analyst at Barclays
• Amit Goel, Research Analyst at Mediobanca
• Benjamin Cavan-Roberts, VP at Goldman Sachs International
• Christopher Cant, Head of Banks Strategy at Autonomous
• Ed Firth, Managing Director at KBW
• Guy Stebbings, Executive Director of European Banks Research at BNP Paribas
• James Invine, Equity Analyst at Rothschild & Co Redburn
• Jonathan Pierce, Equity Analyst at Jefferies
• Rob Noble, Banks Analyst at Deutsche Bank
• Sheel Shah, Executive Director at JPMorgan