NatWest Group Q2 Earnings Call Highlights

Key Points

• NatWest’s second-quarter performance strengthened: Income excluding notable items rose 5.4% to £4.4 billion, operating profit increased 12.4% to £2.3 billion, and return on tangible equity reached 21%. The bank raised its 2026 return-on-tangible-equity guidance to above 19%.
• Growth was broad-based, with customer assets and liabilities rising £86.8 billion, including £9.7 billion in lending growth and £73.9 billion in assets under management and administration following the Evelyn Partners acquisition.
• Credit quality and capital remained resilient: The impairment rate was 13 basis points, below the bank’s full-year expectation of 25 basis points, while the CET1 ratio stood at 13.2%. NatWest raised full-year income guidance to approximately £17.9 billion and expects to announce its next share buyback with full-year results.

NatWest Group NYSE: NWG reported higher second-quarter income and profit, supported by broad-based lending growth, higher non-interest income and continued operating leverage, while raising its 2026 return-on-tangible-equity guidance to more than 19%.

Chief Financial Officer Katie Murray said the bank’s first-half results reflected progress toward its 2028 targets for customer growth, efficiency, capital generation and returns. NatWest reported a first-half return on tangible equity of 19.7%, while its second-quarter return on tangible equity reached 21%.

“Our performance makes clear we have the capability and capacity to grow at scale,” Murray said, citing growth across the group’s three businesses, improving efficiency and low credit losses.

Second-quarter income and profit rise

Second-quarter income excluding notable items increased 5.4% from the first quarter to £4.4 billion. Total operating costs increased 1.8% to £2.1 billion, producing a one-percentage-point improvement in the cost-income ratio to 45.5% for the quarter.

Operating profit rose 12.4% to £2.3 billion, while profit attributable to ordinary shareholders was £1.6 billion. Non-interest income increased 15%, or £124 million, during the quarter.

For the first half, NatWest said income growth of 8.9% exceeded cost growth of 4.5%, reducing the cost-income ratio by 2.8 percentage points to 46%. Murray said the group now expects other operating expenses of about £8.5 billion for the full year.

• Second-quarter income excluding notable items: £4.4 billion
• Second-quarter operating profit: £2.3 billion
• Second-quarter profit attributable to ordinary shareholders: £1.6 billion
• First-half cost-income ratio: 46%
• First-half return on tangible equity: 19.7%

Customer balances boosted by Evelyn Partners

Customer assets and liabilities increased by £86.8 billion, or 9.6%, in the second quarter to £986.9 billion. The increase included £9.7 billion in customer lending growth, £2.8 billion in deposit growth and a £73.9 billion rise in assets under management and administration, including the acquisition of Evelyn Partners.

NatWest said its acquisition of Evelyn Partners had completed, adding exposure to the U.K. wealth-management market. Assets under management and administration totaled £130.6 billion at quarter-end, including £71.7 billion from Evelyn Partners. The total also reflected a £4 billion reduction related to the sale of Cushon in May.

Loans in Retail Banking and Private Banking and Wealth Management rose £4 billion, including £3.9 billion of mortgage growth. NatWest’s mortgage stock share increased to 12.7%, with Murray citing record applications in March. Commercial and Institutional lending increased £5.7 billion, with the strongest growth among larger corporates and institutions.

Customer deposits rose £2.8 billion during the quarter, led by a £2.5 billion increase in Commercial and Institutional deposits. Retail deposits were stable, as customers continued to move balances toward fixed- and variable-rate ISAs, according to Murray.

Credit quality, capital and liquidity remain strong

The bank recorded a £140 million impairment charge in the second quarter, equivalent to 13 basis points of loans. Murray said NatWest saw no new signs of stress across its businesses and continued to expect a full-year loan impairment rate below 25 basis points. The group held £284 million of economic-uncertainty post-model adjustments, within total post-model adjustments of £316 million.

Group Treasurer Donal Quaid said NatWest ended the first half with a CET1 ratio of 13.2% after the Evelyn Partners acquisition and after accruing 50% of attributable profit for ordinary dividends. CET1 was 14% before distributions. The group generated 197 basis points of CET1 capital during the first half, including a 31-basis-point contribution from risk-weighted-asset management.

NatWest reported a total MREL ratio of 30.6%, a total capital ratio of 18.9% and a leverage ratio of 4.7%. Its average liquidity coverage ratio was 140%, with approximately £44 billion of surplus primary liquidity above minimum requirements. Primary liquidity totaled £152 billion, while total liquidity was £224.6 billion.

The loan-to-deposit ratio was 90%, and customer deposits accounted for more than 80% of group funding, Quaid said.

Funding plans and updated outlook

NatWest issued £2.7 billion sterling equivalent across holding-company senior debt, additional Tier 1 securities and Tier 2 capital in the first half. NatWest Markets issued a further £3.7 billion sterling equivalent. The bank also returned to the covered-bond market in June with a £1 billion issuance, its first since 2024, and Quaid said it expects another covered-bond transaction later in the year.

For the remainder of 2026, Quaid said the group expects to remain active in MREL issuance and may consider additional AT1 issuance, while it considers its Tier 2 issuance complete for the year. He said capital issuance should be relatively light in subsequent years, with requirements primarily driven by refinancing calls and maturities as well as balance-sheet growth.

Management raised its full-year guidance to approximately £17.9 billion of income excluding notable items and other operating expenses of around £8.5 billion. NatWest also expects capital generation before distributions and the impact of Evelyn Partners to exceed 240 basis points, compared with its prior outlook, and said it expects to announce its next share buyback alongside full-year results in February.

About NatWest Group (NYSE:NWG)

NatWest Group plc is a major UK-based banking and financial services group headquartered in Edinburgh, Scotland. The company traces its roots to the Royal Bank of Scotland, founded in 1727, and adopted the NatWest Group name in 2020 as part of a strategic refocus on its NatWest brand. NatWest Group is listed on the London Stock Exchange and also has American depositary shares trading on the New York Stock Exchange under the symbol NWG.

The group provides a broad range of banking services across retail, private, commercial, corporate and institutional segments.

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